AIRB 2017 Annual Review Bill Adams, Vice-President, Western Ryan Stein, Director of Policy August 15, 2017

Transcription

1 AIRB 2017 Annual Review Bill Adams, Vice-President, Western Ryan Stein, Director of Policy August 15, 2017

2 Annual Review 2017 Agenda Overview of Alberta s auto insurance market Analysis of bodily injury claims Review of grid population s loss experience 2

3 Overview of Auto Insurance Market (1/6) Bodily Injury Claims Vehicle Thefts Natural Catastrophes Health Levy Deteriorating auto insurance market 3

4 Overview of Auto Insurance Market (2/6) 50% Percentage Change in Bodily Injury Loss Costs Since % 25% 17% 0% Alberta Ontario Atlantic Canada (7%) -25% Source: IBC graph with data from Dr. Ron Miller for Alberta and from GISA for Ontario and Atlantic Canada. 4

5 Overview of Auto Insurance Market (3/6) 120,000 Comprehensive Catastrophe Claims Between 2011 and ,819 80,000 40,000 29,983 5,854 0 Alberta Ontario Atlantic Canada Source: IBC graph with data from GISA. 5

6 Overview of Auto Insurance Market (4/6) 50% Percentage Change in Theft Claims Frequency Since % 25% 0% Alberta Ontario Atlantic Canada -25% (28%) (21%) -50% Source: IBC graph with data from GISA. Based on claims at the six-month development level. 6

7 Overview of Auto Insurance Market (5/6) 100% Percentage Change in Health Levy Since % 72% 50% 33% 25% 0% 0% Alberta Ontario Atlantic Canada Source: IBC graph with data from Alberta government and GISA. 7

8 Overview of Auto Insurance Market (6/6) 90% Alberta Private Passenger Vehicle Loss Ratio 80% 70% 60% 50% Source: IBC graph with data from Dr. Ron Miller. Includes the health levy. 8

9 Analysis of Bodily Injury Claims (1/9) Bodily Injury Claims Experience by Accident Year Claims per 100 Vehicles Average Claim Cost Loss Cost $41,523 $ $46,856 $ $51,950 $ $57,376 $ $65,098 $ $64,387 $337 Annual Change (2.7%) 9.2% 6.2% Source: IBC table with data from Dr. Ron Miller. 9

10 Analysis of Bodily Injury Claims (2/9) Bodily Injury Claims Size Distribution by Accident Year 100% Under $15,000 Over $15, % 16.5% 17.5% 20.3% 19.8% 18.8% 20.4% 24.4% 26.4% 80% 60% 81.0% 83.5% 82.5% 79.7% 80.2% 81.2% 79.6% 75.6% 73.6% 40% Source: IBC graph with data from GISA. GISA does not develop the size of claim distribution exhibits to ultimate values. The estimates are based on claims at the most up to date three-year development level. 10

11 Analysis of Bodily Injury Claims (3/9) Average Settlement for Claimants with Minor Physical Injuries Claimant Count Non-Pecuniary Total Settlement Minor Injury Only 1,210 $3,603 $5,419 Minor Injury with Ancillary Condition (capped) 24 $4,678 $8,439 Minor Injury with Ancillary Condition (not capped) 186 $23,658 $42,432 Source: IBC bodily injury closed claims study. All claimant files closed in early 2014 or late

12 Analysis of Bodily Injury Claims (4/9) Potential Factors Change in insurers reserving practices Change in auto insurance liability limits Increase in health care costs and/or wages The effect of prejudgment interest Increase in legal costs 12

13 Analysis of Bodily Injury Claims (5/9) Average Ratio of Outstanding Losses to Incurred Losses 2007 to 2011 Since Months 96.9% 97.2% 12 Months 88.4% 88.7% 18 Months 80.2% 81.0% 24 Months 73.3% 73.0% 36 Months 65.1% 63.3% Source: IBC table with data from GISA. Percentages in column 2 are an average of the five-year period. Percentages in column 3 are an average of the applicable development months. 13

14 Analysis of Bodily Injury Claims (6/9) Proportion of Earned Vehicles by Liability Limit 100% Up to $500,000 $500,000 to $1 million $1 million plus 75% 50% 25% 0% Source: IBC graph with data from GISA. 14

15 Analysis of Bodily Injury Claims (7/9) Annual Increases in General Health Care Spending and Wages 6.0% General Health Care Wages 4% 3% 4% 4% 3.0% 2% 2% 2% 1% 1% 1% 0.0% (0.3%) -3.0% (2%) Source: IBC graph with data from the Canadian Institute for Health Information and Statistics Canada. 15

16 Analysis of Bodily Injury Claims (8/9) Investment Rate and Prejudgment Interest Rate 5% Investment Rate Non-Pecuniary Damages Prejudgment Interest Rate 4% 3% 2% 1% 0% Source: IBC graph with data from the Bank of Canada. The investment rate is an average of 3-year and 5-year Government of Canada bonds. Values are annual averages of average monthly yields. 16

17 Analysis of Bodily Injury Claims (9/9) Analysis Sparrowhawk v. Zapoltinsky decision caused the bodily injury claim cost trend to change Bodily injury claims costs are projected to continue increasing at a high rate Regulatory reform is needed to reduce and contain bodily injury claims costs 17

18 Grid Loss Experience (1/8) 10% Market Share of Grid Vehicle Population 8% 7.6% 7.1% 6.6% 6.1% 5.5% 5% 3% 0% Source: IBC graph with data from Dr. Ron Miller. Based on car-years earned exposure. 18

19 Grid Loss Experience (2/8) Loss Cost Movement for Basic Coverage, Indexed to Grid Vehicles Non-Grid Vehicles Total Market Source: IBC graph with data from Dr. Ron Miller. Includes the health levy. 19

20 Grid Loss Experience (3/8) Loss Ratio for Basic Coverage 120% Grid Vehicles Non-Grid Vehicles Total Market 100% 80% 60% Source: IBC graph with data from Dr. Ron Miller. Includes the health levy. 20

21 Grid Loss Experience (4/8) $30 Grid Underwriting Results for Basic Coverage ($ millions) $ $30 ($29) -$60 ($52) ($55) -$90 ($70) ($86) Source: IBC graph with data from Dr. Ron Miller. Includes the health levy. Operating expenses were estimated based on data from GISA and Dr. Miller. 21

22 Grid Loss Experience (5/8) 12 Grid Basic Coverage Claim Frequency per 100 Vehicles Source: IBC graph with data from Dr. Ron Miller. 22

23 Grid Loss Experience (6/8) Future Loss Cost Trend Rates for Basic Coverage Oliver Wyman Dr. Ron Miller Difference Bodily Injury +7.75% +6.67% (1.08 p/p) Property Damage +1.50% +2.83% 1.33 p/p Med/Rehab % 0.82 p/p Disability Income +4.50% +3.98% (0.52 p/p) Source: IBC table with data from Dr. Ron Miller. 23

24 Grid Loss Experience (7/8) 10% Changes in Basic Coverage Average Premium for Total Market 8% 6.6% 5% 4.1% 4.7% 3% 2.7% 0% (0.7%) -3% Source: IBC graph with data from Dr. Ron Miller. 24

25 Grid Loss Experience (8/8) Analysis The low 2016 claim frequency rate is not indicative of a new trend Claims costs are increasing at a higher rate than in the past and premiums are rising An increase to the grid by a greater amount than the previous adjustment of 8% is warranted 25

26 Conclusion Overview The auto insurance market continues to deteriorate No indication of government reforms to reduce and contain bodily injury claims costs Difficult decisions on the grid and insurer rating programs have become the norm 26