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Federally regulated Canadian P&C insurers boost results in 2012 Q1

Federally regulated property and casualty insurers in Canada posted improved financial results in 2012 Q1, recording a collective quarterly profit of $1.048 billion this quarter as opposed to a $721.7-million profit in the same period last year.

Figures from the Office of the Superintendent of Financial Institutions (OSFI) show that insurers wrote net premiums of $8.2 billion in 2012 Q1, up from $7.5 billion for the same quarter in 2011. Despite this increase in premium revenue, insurers saw their quarterly investment income sink from $815.2 million last year to $753.8 million in 2012 Q1.

 OSFI figures show auto AB loss ration down, liability ratios up

2012 Q1 claims figures from the Office of the Superintendent of Financial Institutions (OSFI) indicate that although quarterly claims ratios in the private passenger personal accident category – encompassing accident benefits – have shown a dramatic improvement, auto insurance liability figures are taking a turn for the worse. In the auto insurance personal accident category, Canadian P&C insurers saw quarterly claims ratios decrease from 78.34% in 2011 Q1 to 56.87% in 2012 Q1.

Foreign insurers saw claims ratios in the same category drop from 123.34% during the first quarter last year down to 84.01% in 2012 Q1.

On the flip side, auto liability claims ratios have reached the unprofitable territory for some.

Canadian P&C insurers reported a first quarter claims ratio of 71.68% on the auto liability side last year. This year, the ratio has escalated to 80.69%.

Foreign insurers have seen their auto liability claims ratio jump from 91.89% in 2011 Q1 to 116.71% in 2012 Q1.

Oliver Wyman and IBC recommend double-digit rate increase for 2012

Oliver Wyman, the actuary for the Alberta Automobile Insurance Rate Board (AIRB), and Insurance Bureau of Canada (IBC) are 2.2% apart in their respective recommendations for annual industry-wide rate adjustments to the AIRB, with each suggesting a double-digit increase.

Oliver Wyman is suggesting an industry-wide rate adjustment of 10.9% for 2012, whereas IBC is recommending a 13.1% rate adjustment. The AIRB has not made a final decision.

Last year, Oliver Wyman suggested a 9% adjustment, but the board opted to hold the line on adjustments, with no increase or decrease. In 2010, Oliver Wyman called for a flat rate adjustment and the board ordered a 5% decrease.

The annual industry-wide rate adjustment is based on the difference between the estimated required average premium and the estimated average street premium (what is currently being charged). 

CLAIMS

New Brunswick proposes to triple cap for minor auto injuries

New Brunswick is proposing to increase its $2,500 cap on minor auto injuries up to $7,500 and come up with a new definition for minor injuries that would see fewer people come under the cap.

The government tabled its response to the Auto Insurance Working Group with the legislative assembly on June 28. The government is currently seeking public input on its proposal.

“The new [minor injury] definition would mean that fewer New Brunswickers would be limited by the cap,” said New Brunswick Justice Minister and Attorney General Marie-Claude Blais. “Our recommendation of a $7,500 cap exceeds the working group’s suggested cap.”

The government’s response says actuaries have calculated that 71% would come under the proposed definition of minor injury as opposed to 81% under the current definition.

New Brunswick’s Auto Insurance Working Group recommended in November 2011 that the government increase its minor injury auto cap to between $4,000 and $6,000, and index the cap annually to the Consumer Price Index (CPI).

The government’s full response can be found at: http://bit.ly/nbminor 

FSCO proposes Cat definition that does not combine physical and psychiatric impairments 

Ontario’s regulator is recommending to the finance minister that physical impairments should not be combined with psychiatric or mental/behavioural impairments for the purpose of determining a catastrophic injury.

Ontario’s regulatory superintendent has thus adopted the recommendations of an expert medical panel in a report to the government posted on Financial Services Commission of Ontario’s (FSCO) website on June 12. It is up to the government whether or not to adopt the report recommendations.

FSCO’s long-awaited review of the catastrophic impairment definition was part of the government’s auto insurance reform package implemented in 2010.

The superintendent recommended that a combination of requirements be used to determine a psychiatric catastrophic impairment. However, psychiatric and physical impairments should not be combined for the purpose of determining a catastrophic impairment of the whole person, the superintendent writes in his Superintendent’s Report on the Definition of Catastrophic Impairment in the Statutory Accident Benefits Schedule.

The full contents of the report can be found at the FSCO website.

Scientific precision not necessary to find ‘but for’ causation

Scientific precision is not a necessary condition to find “but for” causation on a balance of probabilities, the Supreme Court of Canada has found.

The court ordered a retrial in the motorcycle accident case Clements v. Clements, in which the trial judge found that the victim could not prove “but for” causation to explain her injuries because of the limits of scientific reconstruction evidence.

“As a general rule, a plaintiff cannot succeed unless she shows as a matter of fact that she would not have suffered the loss ‘but for’ the negligent act or acts of the defendant,” the Supreme Court ruled in a 7-2 decision. “In this case, the trial judge committed two errors.

“First, he insisted on scientific reconstruction evidence as a necessary condition of finding ‘but for’ causation. Scientific precision is not necessary to a conclusion that ‘but for’ causation is established on a balance of probabilities. “Second, the court determined, the trial judge incorrectly substituted a “material contribution” test for the “but for” causation test.

The full decision can be found at the Supreme Court of Canada website.