In August 2013 the Ontario government announced a two-year rate reduction strategy. What has ensued since that announcement has been a series of reforms to bring down the cost of insurance. Many of those reforms include no-fault accident benefit reductions.
So how successful has the strategy been? Last week FSCO posted the fourth quarter rate approvals for 2015. The FSCO post indicates that rates fell a minuscule 0.15% in the quarter. For the entire year, rates fell by just 1.0%. Since August 2013, rates have only come down by 7.1%. That's not even half of what the government has been trying to achieve.
Premier Kathleen Wynne now calls the 15% rate reduction strategy a "stretch goal". That's as close as you're going to get a government to admit to failure.
Another round of no-fault accident benefit cuts are to be introduced on June 1 of this year but don't expect them to bring down rates by a significant amount. The accident benefits portion of the Ontario in 2014 was only 33.5% of claim costs (see the chart below). That would mean for a further 8% reduction in premiums, accident benefit costs would have to go down by about 24%. Meanwhile, some of the accident benefit cuts will drift over to third party liability costs since not at-fault accident victims will be able to sue for benefits no longer available through no-fault.
It's time the government undertake a comprehensive review of the auto insurance system and resolve the systemic problems plaguing the system. Half measures lead to "stretch goals" and chronically high insurance premiums.
No comments:
Post a Comment
Comments are welcome on this blog. However, comments will be moderated and inappropriate and anonymous comments will not be posted. If you wish to have your comments posted please identify yourself. No advertising will be permitted.