Ontario has pledged to reduce auto insurance rates by 15 per cent on average before the end of next summer, and the province’s newly elected Liberal government should help insurers move toward that target, according to one analyst.
The majority status of the government means no significant changes to the initiatives aimed at curbing the cost of insurance claims for the province’s more than nine million drivers, said Tom MacKinnon, analyst with BMO Nesbitt Burns.
“In our opinion, the Liberals understand the Ontario auto issue and are committed to a two-sided solution (rate reductions met with claims cost reductions),” Mr. MacKinnon wrote in a note to clients.
Changes include cracking down on fraud related to repairing a vehicle after a collision, legislative amendments to overhaul the dispute resolution system, and other cost-saving measures such as possible provincial regulation of the towing industry.
That’s good news for insurers – particularly those companies with significant exposure to Ontario auto insurance.
Intact Financial Corp., the country’s largest property and casualty insurance company with 17-per-cent market share, has one-fifth of its business in Ontario auto insurance, Mr. MacKinnon noted. But chief executive officer Charles Brindamour is confident that the government will make good on its promises to offset the policy reductions with cost-saving measures.
“The [Ontario] government’s auto insurance cost and rate reduction strategy has been successful thus far at reducing filed rates by 5.7 per cent across the market as a whole,” Mr. Brindamour said on a conference call with analysts in May. The company said it began reducing customer rates by 5.3 per cent on average in April.
At the time, he noted that further rate reductions could only come from cost reductions – in part through legislation that was put on hold with the dissolution of government.
But now that the Liberals have a majority, momentum could pick up again.
“A Liberal majority is also a positive in that the NDP party (historically not Ontario auto insurance company-friendly, in our opinion) no longer generally holds the balance of power,” Mr. MacKinnon said.