The mandatory insurance product is defined by FSCO -- the same regulatory body that will be enforcing the rate reductions. Insurance companies will not be able to change the level of benefits included in the mandatory insurance product.
Ontario Gov't mandates a 15% decrease to *Auto* Insurance Rates
- Thread starter VifferFun
- Start date
The mandatory insurance product is defined by FSCO -- the same regulatory body that will be enforcing the rate reductions. Insurance companies will not be able to change the level of benefits included in the mandatory insurance product.
The rate increases would not have been approved by FSCO unless they were warranted. Companies can't increase rates on a whim -- it requires full actuarial justification.
As I already mentioned, not all companies are doing the same thing. My employer had room to decrease rates over the last two years, and that is precisely what we did.
Rossi -- have you ever heard of FSCO? Or how about OSFI? Insurance is probably one of the most regulated industries in all of Canada. Everything we do has to be justified with the regulator -- even DECREASING rates.
Insurance companies can, and do, lose significant amounts of money in some years. Insurance companies can also make significant amounts of money in other years Over the long run, insurance companies are certainly profitable or they would close shop. Contrary to popular belief, the level of profit is not absurd given the risk insurance companies take on. Companies generally target to spend $0.95 in claims for every $1.00 received, which works out to about a 10 percent ROE after investment gains. Just like any other industry, the shareholders demand a certain return for their risk or they will take their capital elsewhere. Without a return there would be no investment capital, and without investment capital there would be no insurance companies.
If you think insurance companies make a killing in profit, then sell everything you have and invest in insurance companies and see yourself get rich. Hopefully your logic isn't flawed . . .
If the government wanted to reduce insurance costs, they could look into the insurance scams that are costing the industry billions. Ragu, who has been dealt with on this forum is not a fluke. He is part of an epidemic of insurance scammers that have unfortunately made Canada home. For profit physio therapy clinics, Doctors, staged accidents cost Canadian consumers dearly in higher rates.
Not only do these foreign born scam artists cause higher insurance rates, they waste hospital resources with their fake symptoms, when they are brought into ER departments.
The province should start a hotline for Hospital workers to call when they suspect a fraudulent accident victim. If the name of the so called accident victim, owner of the physio clinic, witnesses, and family Doctor all sound like they are from the same country, then scrutinize the whole group. If fraud is suspected, use Ontario's civil forfeiture laws to seize the clinic, doctors office and their homes and vehicles. The doctors medical license can be suspended also.
Not only do these foreign born scam artists cause higher insurance rates, they waste hospital resources with their fake symptoms, when they are brought into ER departments.
The province should start a hotline for Hospital workers to call when they suspect a fraudulent accident victim. If the name of the so called accident victim, owner of the physio clinic, witnesses, and family Doctor all sound like they are from the same country, then scrutinize the whole group. If fraud is suspected, use Ontario's civil forfeiture laws to seize the clinic, doctors office and their homes and vehicles. The doctors medical license can be suspended also.
Oh, I'm totally aware that those regulatory bodies exist, it's just that they have been doing very little regulating for the last decade or so
I think there has also been some gaming of the system when it can be gotten away with. For instance, when Intact bought out Jevco, many policy holders received a regulator-approved increase of 20 percent or more, as Jevco had applied to be allowed an increase and Intact applied as well.
Both were awarded a high or maximum increase. Intact was of course happy to apply both increases to the affected policy holders.
Needless to say, I switched insurers. Thankfully I can still do that.
Both were awarded a high or maximum increase. Intact was of course happy to apply both increases to the affected policy holders.
Needless to say, I switched insurers. Thankfully I can still do that.
Last edited:
GateKeeper
Well-known member
some light reading and something to mull over...a conversation with a friend in the industry.....
And we still think we are going to see a decrease......ya right......
Anyone company on here willing to give me a decrease of 15% right now, I will move all my Insurance over to you......but don't ding me for a 20% increase next year or for the next 3 years,,,,,,good luck in that.....
.
And we still think we are going to see a decrease......ya right......
Anyone company on here willing to give me a decrease of 15% right now, I will move all my Insurance over to you......but don't ding me for a 20% increase next year or for the next 3 years,,,,,,good luck in that.....
.
Not that I would expect people outside of the insurance industry to be aware of it (since it's admittedly dry material), but Ontario is one of the most heavily regulated jurisdictions in Canada, if not North America. If you don't think they're regulating, then you're just not informed.
That's an unusual circumstance. When Intact bought Jevco, it sounds like they simply rolled all of the Jevco clients onto the Intact rating algorithm en masse (which was probably allowed by FSCO because the Intact algorithm was already in effect for their own policyholders and hence approved). Since different companies target different risks, this resulted in some large premium increases and large premium decreases (although you won't hear about the decreases much, but they do exist). Intact would have expected that the vast majority of people with large increases would have just walked away, so it wasn't a money grab. It's purely speculation on my part, but I suspect that Intact wanted Jevco's auto business but wasn't really interested in the motorcycle business, otherwise they could have retained the Jevco motorcycle rates for a few years until they figured out a transition strategy.
As your friend alluded to, there is still a lot of uncertainly in exactly *how* the 15% reduction is going to be allocated. All that we know at this point is that a 15% overall reduction in auto insurance premiums IS going to happen, but that doesn't mean that every person will see a 15% decrease. 15% will be the average across Ontario. It's possible that some people will see a 30% decrease, while others will see no decrease at all, but in the aggregate Ontario will see a 15% decrease.
It's also not clear if every company is going to be required to take a 15% average decrease, or if the Gov't will allocate decreases based on each company's indicated rate change (i.e. the analysis that shows how much rates must increase or decrease to remain adequate to pay out future claims). Suppose my company has an indicated change of -5% but a competitor has an indicated change of -20% -- the Gov't could mandate that I reduce rates by only 5% but the competitor will have to reduce by 20%. If such an allocation doesn't happen, then it wouldn't be fair to the companies that already run on really tight margins and could actually cause them to withdrawal from the market entirely. For example, suppose that FSCO told State Farm that they had to reduce their motorcycle rates by 15%, but they are already losing money on that book -- they could just say "screw you, FSCO!" and cancel their Motorcycle insurance program entirely, and that wouldn't be good for anyone (especially the sport riders!).
GateKeeper
Well-known member
in other words........don't hold your breath on any significant savings......
legalized extortionists, the whole Insurance industry.....
and I don't just blame them, but the Government as well, they are not any better....
.
legalized extortionists, the whole Insurance industry.....
and I don't just blame them, but the Government as well, they are not any better....
.
DownUnder
Well-known member
Wonder how Insurance companies in other provinces and around the world can survive with such low rates.. since the poor Ontario Insurance agencies are "bleeding" money while having the highest rates around...
Ontario is being scammed by Insurance companies and no one seems to care.
Ontario is being scammed by Insurance companies and no one seems to care.
Man, a few years ago Manitoba's public insurance company was doing so well they actually paid a dividend out to every Manitoban.
Insurance schemes are different from most businesses. Because they benefit most from spreading risks as wide as possible, nationalized insurance monopolies tend to work better - ESPECIALLY if the insurance is mandatory, because then you don't have a free market anyway. Which is why those provinces with nationalized provincial car insurance have vastly better rates and often better coverage too. Plus as a government company with a single database on ALL drivers in the province, they can detect fraud better and work more closely with police in cases of fraud etc.
Alberta has mandatory private car insurance too and the situation there is almost as bad as it is here.
Insurance schemes are different from most businesses. Because they benefit most from spreading risks as wide as possible, nationalized insurance monopolies tend to work better - ESPECIALLY if the insurance is mandatory, because then you don't have a free market anyway. Which is why those provinces with nationalized provincial car insurance have vastly better rates and often better coverage too. Plus as a government company with a single database on ALL drivers in the province, they can detect fraud better and work more closely with police in cases of fraud etc.
Alberta has mandatory private car insurance too and the situation there is almost as bad as it is here.
Ontario is also one the most expensive provinces in Canada, if not in North America to buy auto insurance. If insurance companies were regulated as they should be, we wouldn't be getting ripped off the way we are. It's easy to pretend to regulate something and get paid lots of money to do it. If you think they are regulating then YOU're just not informed.
Correct if I'm wrong but isn't that what just happened recently a few years ago. When the insurance industry promised us lower rates but in fact all we got was lower coverage. We now have an option to pay more for insurance to get the coverage we originally had.
The insurance product, litigation environment, propensity to sue, and likelihood of a collision are *very* different between provinces. Heck, these factors vary widely within a province (eg. GTA vs the rest of Ontario) or even within a specific city (eg. Brampton/North York/Scarborough vs. the rest of the GTA). The profit margins in Ontario are no different than the profit margins in the rest of Canada. In fact, most of the companies providing insurance in Ontario are the same companies providing insurance in the other provinces.
Private companies can already spread the risk quite well, but there are certainly arguments for (and against) Gov't insurance programs. The biggest benefits are that the Gov't can subsidize insurance rates through general tax revenues, or have a less-risky group (such as 30-50yo operators) pay higher premiums to subsidize lower premiums for a high-risk group (such as 15-24yo operators). The biggest drawback is that the policyholder no longer has the option to shop around. If the Gov't decides they will no longer write sport bikes or levies a 400% surcharge, then tough luck -- State Farm is not there to write you. If the Gov't is known for terrible claims service and you would prefer spending an extra $100/yr for a policy with a company known for outstanding service, tough luck -- you're stuck. I'm not saying that Gov't insurance is bad, but these are possibilities.
People think that Gov't programs automatically imply cheaper rates, but this is not true. I have done the analysis and if my employer were allowed to provide policies in Saskatchewan, our rates would be cheaper than the Gov't program there (SGI). Saskatchewan rates are cheap because it's Saskatchewan -- low population density, low propensity to sue, flat land with clear visibility, etc.
You're not getting ripped off by insurance companies -- you're getting ripped off by your fellow Ontarians making bonehead moves on the road or claiming when they shouldn't.
The regulations are not a secret -- you're welcome to read through the Ontario rate filing guidelines:
http://www.fsco.gov.on.ca/EN/AUTO/FILING-GUIDELINES/Pages/default.aspx
For a general idea, most rate changes that I have filed in the last few years require about 400 pages of analytical support -- even rate decreases. Even with all of that documentation, there could be weeks/months of dialog with the regulator's consulting actuaries requesting further clarification, forcing changes to the proposal, etc. before it is approved.
