Alberta’s insurers are calling for an average auto insurance rate increase of 13.5% to help offset rising bodily injury claims costs, which are driven in part by recent adverse court decisions.
Brokers in the province say auto rate increases are always a tough sell to consumers, so the rate board may in fact go lower when it ultimately decides on the actual value of the increase. But brokers aren’t surprised by the request for an increase given the escalating costs for insurers more generally within the province’s auto insurance market.
“My guess is that the 13% that insurers are looking for, they aren’t going to get that,” said Gord Cowan of Cowan Agencies. “I think 13% would create a bit of a backlash from the public…
“I’m more thinking in the line of 6% to 7%. I think that’s where it will settle out.”
Cowan said auto insurance in Alberta has thus far been quiet, taking a back seat to increasing claims costs in homeowner lines due to storm damage. But the same storms have had an impact on auto claims as well.
“I think that may be an anomaly with respect to the rest of the country,” said Cowan. “We’ve just had so many comprehensive damage claims with respect to hail that a 6-7% increase is probably warranted.”
Insurance Bureau of Canada (IBC) presented its findings at an annual public meeting of the Alberta Automobile Insurance Rate Board (AIRB). The board meets once a year to decide whether there will be an industry-wide adjustment to the maximum premium amounts insurers can charge based on the province’s grid system for basic automobile coverage.
Robyn Young of Lundgren & Young Insurance observes that rate changes related to the grid are adjusted according to insurers’ liability costs, as opposed to other kinds of claims costs, such as comprehensive damage claims. “If it’s a rate reduction or increase to the grid, then it’s only the liability portion that’s affected – not physical damage coverage,” she said.
IBC’s recent presentation to the AIRB says bodily injury claims are on the rise due to a number of recent court decisions affecting insurers’ liability costs.
For example, in the 2012 case of Sparrowhawk v. Zapoltinsky, an Alberta court ruled that the temporomandibular joint disorder (TMD), also known as ‘lockjaw,’ suffered by one claimant was not a minor injury. Therefore, the province’s cap on insurance payments for the treatment of minor injuries, currently adjusted for inflation at $4,725, does not apply to TMD cases.
As far back as 2004, claims with TMD diagnoses were responsible for 18.4% of bodily injury settlement dollars paid by insurance companies, while representing only 7.7% of these claims. Since the decision in Sparrowhawk, TMD cases are drawing legal representation, driving up the costs of settlements, IBC said.
“In our view, these developments suggest that more stakeholders may be beginning to use the Section 8 process to assert those types of injuries (TMD, chronic pain, depression) that can take their claim out of the minor injury class in order to build the case for more lucrative bodily injury general damages awards,” IBC said in its submission to the AIRB.
Also, a recent case found that a vehicle owner should receive $17,000 in compensation from his insurer because the value of his car had been depreciated after it had been repaired following an accident. The court ruled the owner should be compensated for depreciation regardless of the quality of the repairs.
“Already, companies report receiving more claims for compensation for the perceived diminished value of a vehicle after it has been repaired following a collision,” IBC reported to the AIRB. “This development is not surprising because the size of the award in the case cited established an attractive windfall target even for individuals with no plans to sell their repaired vehicles.”
