In response to a report recently released by the Ontario Trial Lawyers Association (OTLA), which claims to explain why Ontario’s auto insurance is too pricey, the Insurance Bureau of Canada (IBC) has issued its own release which calls out the author of the report due to his alleged history of reporting inaccuracies.
OTLA’s report was prepared by Dr. Fred Lazar, a professor of York University Schulich School of Business. Lazar claimed in his report that drivers in Ontario pay excessive auto insurance premiums because those premiums are “helping subsidize the rest of the insurance industry.”
However, the IBC, in a statement, called into question Lazar’s credibility as an expert, citing a previous report he prepared in 2019 for trial lawyers in Newfoundland and Labrador. According to IBC, the provincial regulator had asked Lazar why annual losses for insurance companies were not reflected in his report, to which he admitted that “[he] just ignored them.”
NL’s provincial insurance regulator later published its findings on the professor’s work, saying that “the board does not accept the campaign’s expert analysis of industry profitability to be an accurate reflection of the actual profit levels.”
The bureau’s statement also noted that this is not the first time OTLA has paid Lazar to attempt to “thwart” progress being made to improve Ontario’s auto insurance system. Previous reports produced by the professor were reviewed by certified actuaries, and they found fundamental flaws in presenting revenues and return on equity earned by auto insurers in Ontario, as well as errors in insurer expense ratios.
In particular, Lazar’s 2018 report Price Regulation and Possible Premium Overpayments: Automobile Insurance Companies in Ontario was heavily censured by actuaries for singling out data that supported OTLA’s narrative about insurers’ inflated profits.
“Lazar states that insurers do not report their ROE associated with Ontario auto insurance and as such assumptions must be made to undertake this calculation. This statement is incorrect. GISA does, in fact, report ROE in the Automobile Insurance Financial Information Industry Profit and Loss Report Private Passenger Automobile,” said Dr. Mary Kelly, Wilfrid Laurier University professor of finance and insurance chair.
“Lastly, where the author explores alternative assumptions, for example around expenses and the exclusion of companies with negative ROEs, the chosen assumptions are not grounded in the industry’s actual experience and are used to reinforce a false impression of high levels of profitability,” added Satnam McLean, fellow of the Canadian Institute of Actuaries, the Casualty Actuarial Society, and the Institute and Faculty of Actuaries (UK).
IBC offered assurances in its statement that it and its members “remain focused on improving the auto insurance system for all consumers in Ontario.”