There is a crisis in Ontario with auto insurance. Here in Ontario, the last government cut auto insurance 17 times over 8 years, between 2010 and 2018. The government did this to reduce premiums for drivers across the province. But, premiums have not gone down, they have gone up! In fact, between 2017-2019, premiums increased on average by close 20%!
Insurance companies don’t report all their claims costs and profits - we just have to ‘trust' them that the premiums they charge are fair.
The Auto Insurance Industry in Ontario: Lack of Transparency and Excessive Profits
The underreporting of excessive profits by the Ontario auto insurance industry is misleading and unacceptable, as the lack of transparency is unjust for accident victims and residents who pay exorbitant premiums. In Ontario, the insurance industry is not mandated to disclose their profits, which creates a problematic situation for consumers and the government, since regulators are expected to monitor premium rates without having an accurate picture of industry profits. In 2020, York University Schulich School of Business Professor Dr. Fred Lazar published a report that analyzed insurance company profits in Ontario, which revealed some shocking information. Dr. Lazar found that Ontarians had overpaid $5.6 billion worth of premiums from 2011, while insurance company profits have soared over 20% from 2017. According to data collected by the Insurance Bureau of Canada (IBC), Ontario has one of the lowest motor vehicle accident and death rates out of all the provinces, though residents are expected to pay the second highest premiums in the country, which averages $1,505 a year. In February, the Financial Services Regulatory Authority (FSRA) approved increases to automobile premiums for 20 insurance companies across the province. The average rate increase will be 1.56%, though some insurers have been approved to increase their rates by 11%. These rate increases will further line the pockets of flourishing insurance companies, while Ontarians are forced to pay more to keep their vehicles on the road.
In 2019, the General Insurance Statistics Agency (GISA) released their 2018 Actual Loss Ratio Exhibit, which compiled earned premiums and incurred loss information from insurance companies in Ontario between 2014-2018. The GISA is a federally incorporated statistical agency that supports nine insurance regulatory authorities in Canada, by monitoring insurance rates, market structure and performance, and providing aggregate industry data. For bodily injury coverage in 2018, it was reported that the insurance industry generated $3,406,593,348 ($3.4 billion) in earned premiums, while their claim and adjustment expenses were only $1,605,989,407 ($1.6 billion).
The Ontario regulator, FSRA, allows insurers to make a 5% return on premiums for their reasonable profit. Fine. And, FSRA also allows for reasonable insurer expenses of 25% of premiums as part of the industry’s cost structure. So, add 30% and the bodily injury premium would be around $299 ($209/0.7).
That means that insurers are pocketing fully $145 more on average for every single insured vehicle in the province – all 7.5 million vehicles – than is deemed to be fair and reasonable.
That’s approximately $1.1 billion dollars in excess profitability from BI coverage alone. That’s a lot of savings per premium-paying customer.
| Number of Earned Vehicles | Earned Premiums | Incurred Claim Costs and Adjustment Expenses | Profits |
|---|---|---|---|
| 7,662,435 | $3,406,593,348 | $1,605,989,407 | $1,111,053,075 |
The lack of transparency on financial data from the insurance industry in Ontario is a systemic problem, as incomplete information coupled with minimal public scrutiny has led to continual and unreasonable rate increases by FSRA. This relationship between the insurance industry and government has kept Ontarians uniformed about the true extent of profits, which has resulted in high premium rates, with shrinking coverage and reduced benefits.
HELP REBALANCE THE SYSTEM
Share your story, show your support, educate our government and spread the word! Together we can change the system so it works for consumers and accident victims - not just for insurance companies.