Auto Insurance Rates for the Third Quarter of 2015

This notice provides an overview of the private passenger automobile insurance rate changes approved or ordered by the Financial Services Commission of Ontario (FSCO) for filings reviewed in the third quarter of 2015. The number of filings reviewed by FSCO and the overall average rate change for the Ontario market may vary from quarter to quarter, based on updated information about claims costs, market conditions and other financial factors and the resulting impact that these factors have on the adequacy of an insurance company’s current rates.
 

Average Rate Changes

 
FSCO approved 45 private passenger automobile insurance rate filings during the third quarter of 2015. A total of 40 insurers submitted the filings.   
 
These 40 insurers represent 77.45% of the market based on premium volume. Approved rates decreased on average by 0.50% when applied across the total market. Rate changes approved for each insurer this quarter and effective dates of the rate changes are shown in Table 1.
 
This compares to an increase of 0.60% on average for the second quarter of 2015.
 
Regulatory changes have been made to require that all insurers offer a discount to policyholders for the use of winter tires. The winter tire discount must be made available for contracts issued or renewed on or after January 1, 2016, for all eligible private passenger automobile policies.
 
Insurance companies that did not offer a winter tire discount were required to submit a filing to FSCO no later than August 28, 2015. This quarter saw the approval of the majority of these filings.
 

Individual Rates

 
The rate change shown for each insurance company is the average for that company, based on all the drivers it insures. The average rate changes reported are a strong indicator of the direction of premiums in the upcoming policyholder renewal cycle.
 
However, an individual policyholder may experience a rate change that is either higher or lower than the industry-wide average rate change, or the average rate change for a particular insurer, depending on several factors, such as:
 
  • the vehicle insured;
  • where he or she lives, driving experience; and at-fault accident and conviction history of drivers, whether the vehicle is used for pleasure or commuting, and other risk factors;
  • choices made by the policyholder on coverages purchased and deductible or liability limits.
Also, as most policyholders purchase annual policies, any changes approved for the insurer and effective prior to the policy renewal date, or changes in the policyholder’s circumstances since their last renewal (e.g., at-fault accidents, driving convictions, etc.), will impact the policyholder’s rate at renewal.
 
Consumers are urged to shop around for auto insurance. Ontario has a very competitive marketplace. Rates for the same coverage vary based on each insurer’s claims experience and the insurer’s rating system.
 
FSCO has several resources to help consumers better understand auto insurance, including an Understanding Rates/Interactive Tool and tips on shopping around and saving on auto insurance.
 

FSCO's Rate Approval Process

 
Insurers must submit proposed changes to their rates to FSCO for approval along with supporting actuarial data. 
 
FSCO and its actuaries review this data and insurers’ assumptions regarding claims costs, expenses and investment income to ensure that, as required by law, the proposed rates are:
 
  • just and reasonable;
  • not excessive;
  • not going to impair a company’s financial solvency.
As a result of FSCO's review, an insurance company may be required to amend its proposed rates before they are approved.
 
Most premium dollars collected by insurers go towards paying for claims for people injured in car accidents. Insured persons who are injured can make a claim for Accident Benefits (AB), regardless of fault.
 
In some cases, seriously injured parties can also make a claim by launching a lawsuit against the at-fault driver. These claims are paid under the Third Party Liability – Bodily Injury (TPL) coverage of an automobile insurance policy. The AB and TPL coverages account for 61.5% of claims costs, as shown in Graph 1.
 
When an insurance company adjusts its rates for a particular coverage, it means that the company has experienced a change in the claims costs for that coverage. For example, an increase in rates for TPL coverage would indicate that an insurer has experienced a higher number or higher average cost of bodily injury claims. A company must provide claims costs data to FSCO when proposing a rate change for any coverage. 
 
It is important to understand the coverages available to consumers under an automobile insurance policy in Ontario. FSCO has a number of consumer-friendly descriptions of these coverages available on its website.
 

Automobile Insurance Cost and Rate Reduction Strategy

 
The Ontario Government initiated a cost and rate reduction strategy in the 2013 Ontario Budget and has continued on a path of reforms aimed at reducing costs and increasing consumer protection through successive budgets in 2014 and 2015.  The cost and rate reduction strategy builds on the 2010 reforms and includes further measures aimed at reducing costs and fraud in the auto insurance system.
 
Awareness is a vital part of combatting auto insurance fraud. FSCO has a fraud hotline and information for consumers about detecting and avoiding fraud on its website.

 

Table and Graph

 

Table 1

 

Ontario Private Passenger Automobile
Insurance Rate Filings Approved/Ordered

Filings reviewed July 1, 2015 – September 30, 2015

 
Insurer
2014 Market Share (%)
Effective New Business Date
Effective Renewal Business Date
Approved Average Rate Change (%)
ACE INA Insurance
0.00
1-Jan-16
1-Jan-16
-1.19
AIG Insurance Company of Canada
0.04
15-Dec-15
1-Jan-16
-4.13
Allstate Insurance Company of Canada
5.06
21-Dec-15
21-Dec-15
0.03
Aviva Insurance Company of Canada
6.21
1-Aug-15
1-Oct-15
-0.16
CAA Insurance Company (Ontario)
1.27
15-Nov-15
15-Dec-15
0.00
Certas Direct Insurance Company (1)
2.61
28-Oct-15
28-Oct-15
0.27
Certas Home and Auto Insurance Company
9.47
8-Nov-15
15-Jan-16
0.00
Coachman Insurance Company
0.41
1-Jan-16
1-Jan-16
-0.71
Commonwell Mutual Insurance Group, The
0.39
1-Jan-16
1-Jan-16
-1.39
Commonwell Mutual Insurance Group, The (1)
0.39
1-Sep-15
1-Oct-15
0.04
Co-operators General Insurance Company
4.16
1-Nov-15
1-Nov-15
3.45
COSECO Insurance Company
1.18
1-Jan-16
1-Jan-16
-1.91
CUMIS General Insurance Company
0.36
1-Dec-15
1-Dec-15
3.79
CUMIS General Insurance Company
0.36
1-Jan-16
1-Jan-16
-1.94
Dominion of Canada General Insurance Company, The
4.42
1-Jan-16
1-Jan-16
-1.24
Echelon Insurance
0.61
1-Jan-16
1-Jan-16
-1.26
Economical Mutual Insurance Company
3.44
1-Jan-16
1-Jan-16
-3.66
Farm Mutual Reinsurance Plan Inc. (on behalf of Ontario Mutuals)
1.65
1-Jan-16
1-Jan-16
-1.35
Federated Insurance Company of Canada
0.04
1-Jan-16
1-Jan-16
-2.47
Gore Mutual Insurance Company
1.57
1-Nov-15
1-Jan-16
-2.59
Guarantee Company of North America, The
0.61
1-Oct-15
1-Oct-15
-2.50
Guarantee Company of North America, The
0.61
1-Jan-16
1-Jan-16
-2.74
North Waterloo Farmers Mutual Insurance Company
0.31
1-Jan-16
1-Jan-16
-1.52
Northbridge General Insurance Corporation
0.01
1-Dec-15
1-Jan-16
-2.46
Optimum Insurance Company Inc.
0.25
1-Jan-16
1-Jan-16
-0.78
Pembridge Insurance Company
1.42
19-Oct-15
1-Dec-15
2.84
Personal Insurance Company, The (1)
3.80
28-Oct-15
28-Oct-15
0.54
Perth Insurance Company
0.95
1-Jan-16
1-Jan-16
-1.51
Portage La Prairie Mutual Insurance Company, The
0.27
1-Jan-16
1-Jan-16
-2.55
Primmum Insurance Company
1.56
1-Jan-16
1-Jan-16
-1.64
RBC General  Insurance Company
4.52
1-Jan-16
1-Jan-16
-3.01
Royal & SunAlliance Insurance Company of Canada
1.07
1-Aug-15
20-Sep-15
2.66
Royal & SunAlliance Insurance Company of Canada
1.07
1-Jan-16
1-Jan-16
-1.12
Scottish & York Insurance Co. Limited
1.11
13-Sep-15
13-Nov-15
-0.16
Security National Insurance Company
7.49
1-Jan-16
1-Jan-16
-1.46
Sovereign General Insurance Company, The
0.00
1-Jan-16
1-Jan-16
-0.93
Tokio Marine and Nichido Fire Insurance Co., Ltd.
0.01
1-Dec-15
1-Jan-16
-2.48
Traders General Insurance Company
1.79
1-Aug-15
1-Oct-15
-0.16
Unifund Assurance Company
3.73
1-Jan-16
1-Jan-16
-0.12
Waterloo Insurance Company
0.86
1-Jan-16
1-Jan-16
-3.66
Wawanesa Mutual Insurance Company, The
3.64
1-Jan-16
1-Jan-16
-2.42
Western Assurance Company
1.16
1-Sep-15
20-Oct-15
2.69
Western Assurance Company
1.16
1-Jan-16
1-Jan-16
-1.10
XL Insurance Company SE
0.00
1-Jan-16
1-Jan-16
-2.38
Zurich Insurance Company Ltd
0.00
1-Dec-15
1-Jan-16
-3.29
Total Market Impact
-0.50
 
  1. Annual rate cap filing impact – This anniversary capping report was reviewed in this quarter. The chart shows the estimated residual impact of a previously approved rate filing that introduced rate capping procedures. The purpose of rate capping is to minimize the rate change for a particular risk over a period of time. The effective dates for anniversary filing are based on the effective dates in the original rate filing.
 

Graph 1

% of Claim Costs by Coverage for Accidents in 2014

 
% of Claim Costs by Coverage for Accidents in 2014

 
2014 GISA Automobile Statistical Plan AUTO1005 Private Passenger excluding Farmers Actual Loss Ratio Exhibit
 

Accessible Description of Graph 1:

Accident benefits 33.5 percent, Third-party liability bodily injury 28 percent, Direct compensation and property damage 15.6 percent, Collision 16.7 percent, Comprehensive 3.8 percent, Uninsured automobile, 1.6 percent, OPCF 44R Family Protection Coverage 0.8 percent. 


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