“Ontario auto insurance reforms could improve P&C industry profitability: DBRS”

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Ontario auto insurance reforms could improve P&C industry profitability: DBRS Posted: 16 Sep 2010 01:40 PM PDT Advertisement Auto insurance regulations that came into effect in Ontario on September 1 in will ultimately be positive for insurance industry profitability, says DBRS Ltd. However, the rating agency is not convinced the market is entirely healed. In a research note, DBRS says that the new regulations "limit some of the latitude for increasing claims costs especially in the area of accident benefits and bodily injury", and they establish new definitions of catastrophic and minor injuries, with accompanying caps. "With limited upward pressure on claims costs and no expectation of premium reductions, the profitability of the Ontario auto segment should over time be restored to sustainable levels with a favourable impact on broader industry profitability," DBRS predicts. DBRS says that it sees the volatility of the Ontario auto insurance industry as a fundamental rating consideration for the Canadian P&C insurance industry. "As the segment's profitability deteriorates, as it has over the past five years, certain insurance companies that are most heavily weighted towards the sector have similarly suffered the most, financially," the rating agency notes. For the past 20 years, "exposure to the Ontario auto insurance market has generally been a millstone around the neck of the industry", it adds. The rating agency notes that it will take a few years to determine the longer-term impact of these latest reforms, as industry pricing is revisited, and consumer behaviour adjusts to lower standard coverages. Moreover, it warns that this incremental approach to auto insurance reform often "gives rise to additional complications and opportunities for abuses and excesses." "A complete redesign of the industry and the product may well be the best long-term solution," DBRS concludes. IE Read other news from our Industry news Section This entry passed through the Full-Text RSS service — if this is your content and you're reading it on someone else's site, please read our FAQ page at fivefilters.org/content-only/faq.php Five Filters featured article: Beyond Hiroshima - The Non-Reporting of Falluja's Cancer Catastrophe.

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