Canadian Market (August 01, 2010)

ONTARIO REFORM-RELATED 2010 Q2 RATES REFLECT 1% DECREASE

Reform-influenced auto insurance rates filed with Ontario’s regulator in 2010 Q2 show an average rate decrease of 1.03%, when weighted by market share.

The 2010 Q2 rates take into account the province’s auto insurance reforms and will become effective when the reforms are implemented on Sept. 1, 2010.

Scottish & York Insurance Company Limited received the largest rate decrease of 8.07%, followed by Echelon General Insurance Company with a rate decrease of 7.24%.

None of the companies were approved for an increase.

Twenty-four companies — including eight out of the top 10 companies (weighted by market share) — held their rates flat.

BUSINESS INSURANCE COSTS CITED AS “MAJOR COST CONCERN” IN NEWFOUNDLAND

Newfoundland businesses cite insurance costs as Number 1 among their “major cost concerns” in a business barometer survey conducted by the Canadian Federation of Independent Business (CFIB).

The survey canvassed the business optimism of 1,100 CFIB members across the country. Provincial results cite a list of 10 “major cost concerns” of provincial businesses, including tax/regulatory costs, insurance costs, fuel and energy costs, bank account and processing fees, wage costs and others. Respondents were asked to list their top concerns among those listed.

Sixty-five per cent of Newfoundland businesses surveyed ranked insurance costs as a Number 1 major cost concern. Newfoundland is the only province in the survey where concerns about insurance costs ranked at the top of the list.

Elsewhere in Atlantic provinces, insurance costs ranked Number 5 in New Brunswick (44% of respondents reported it being a major concern); Number 3 in P.E.I. (58%); and Number 3 in Nova Scotia (47%).

BANK-OWNED INSURERS DOUBLE MARKET SHARE SINCE 2000

Bank-owned insurers have effectively doubled their market share in personal lines between 2000 and 2009, according to the MSA/Baron Outlook Report Q1-2010.

Meanwhile, the broker channel has seen its market share in personal lines sink over the past decade from 66.6% to 59.5%.

“With the current rules in place, TD and RBC are chewing their way in ever-increasing chunks of the personal lines pie,” MSA Research Inc. president and CEO Joel Baker wrote in the MSA/Baron Outlook Report Q1-2010. “Their growth has far outstripped broker writers and other non-bank writers by huge margins.

“Their share of the noncommercial space effectively doubled since 2000 from 5.3% to 10.6% in 2009, while brokers saw their share slip and other [non-bank] direct writers’ shares effectively went nowhere.”

Non-bank direct writers had a personal lines market share of 29.9% in 2009, which has been relatively flat since 2000. [It was 28% in 2000.]

ALBERTA ORDERS 5% AUTO INSURANCE RATE DECREASE

Going against the advice of its own actuary, Alberta has ordered an industry-wide auto insurance rate decrease of 5%.

The premium reduction takes effect Nov. 1, 2010.

The adjustment applies only to mandatory coverage, which is required by law and includes third party liability and accident benefits coverage.

“This reduction is primarily the result of a projected decline in the number of bodily injury claims in the province this coming year,” AIRB chair Alfred Savage said in a press release. “The decrease will save Alberta drivers an average of $30 per year on their mandatory insurance premiums.”

AIRB said its was based on input from Albertans, the board’s consumer representative, the board’s actuary, and insurers during an open meeting in June.

At that meeting, the board’s actuary, Oliver Wyman, called for a flat rate adjustment.

In a statement, the Insurance Bureau of Canada (IBC) questioned whether the decrease would ultimately fulfill the board’s objective of ensuring fairness to consumers by ensuring a healthy and competitive marketplace.