FACTS. of the Property & Casualty Insurance Industry in Canada 2013

Transcription

1 FACTS of the Property & Casualty Insurance Industry in Canada 2013

2 Copyright page and facts about 2013 FACTS FACTS of the Property & Casualty Insurance Industry is published by Insurance ureau of Canada (IC), the trade association representing Canada s private property and casualty (P&C) insurance companies. IC has published FACTS since 1972 to provide a snapshot of the state of the P&C insurance industry. Data in 2013 FACTS have been gathered from several national and international sources, including IC. Data are from 2010, 2011 or 2012 depending on when sources release their information. In some instances, figures may not add up to 100% as a result of rounding. Also because sources collect data in different ways, there may be small differences among similar data. 35th edition, 2013 ISSN

3 President s message Welcome to the 2013 edition of FACTS of the Property & Casualty Insurance Industry IC is proud to publish this 35 th edition of FACTS. Our purpose in publishing FACTS is to illustrate our industry s contribution to the Canadian economy. We also want to educate Canadians about how insurance works. And finally, we want to provide insurers with a snapshot of the latest industry facts in one easy-to-access publication. We are pleased to see how far FACTS has come since its first publication in For this year s edition of FACTS, we ve made big changes to both the look and feel of IC s signature publication. The first change you ll notice is that we have included more charts and graphics and fewer words. Our thinking is that our readers want to drill down quickly to just the facts, so charts and graphs should make finding what you re looking for both faster and easier. We ve also developed a bold new design again to highlight the all-important numbers that tell our industry s story. ut 2013 FACTS isn t only about the numbers. You ll also find timely analysis of the issues such as the increase in severe weather that are affecting how P&C insurers do business in Canada. You ll also notice some major improvements in the online version of 2013 FACTS (available at You will be able to download individual chapters and charts. IC will continue to publish a print version of FACTS regularly. We hope you enjoy your 2013 edition of FACTS of the Property & Casualty Insurance Industry. I know you ll agree that our numbers tell a story worth sharing. Don Forgeron President & CEO, Insurance ureau of Canada 2013 FACTS 1

4 Contents 3 to 26 Section one: Canada s P&C insurance industry, all sectors 4 Industry at a glance 6 Premiums 9 Insurance dollar 10 Claims 11 Taxes 13 Operating expenses, including employee compensation 14 Profit 17 Major issues severe weather, catastrophic losses, crime, regulation 27 to 50 Section two: Canada s P&C insurance industry by line 28 Auto insurance 28 Compulsory insurance 29 Optional insurance 29 No-fault insurance 30 What s compulsory where 42 Premiums and claims 44 Average losses 45 Major issues safety, crime 47 Home insurance 47 Types of coverage 47 Premiums and claims 48 Major issues severe weather, earthquakes 49 usiness insurance 49 Types of coverage 49 Premiums and claims 51 to 65 Section three: Insurance organizations 52 IC members 58 IC offices and departments 60 Superintendents of insurance 62 Insurance-related organizations FACTS

5 Section one: Canada s P&C insurance industry, all sectors

6 Industry at a glance Section one: canada s P&C insurance industry, all sectors industry at a glance est Insurance ureau of Canada, established in 1964, is the national industry association representing Canada s private home, car and business insurers 47.3% of net written premiums was for one line of business: auto insurance including both private passenger and commercial vehicles 47.3 % Insurance claims resulting from water and wind damage caused by severe weather make up more than half of property insurance claims and are more than claims for fire damage In 2011, IC helped recover stolen vehicles worth $17 million More than 220 private P&C insurers actively compete in Canada In 2010, the P&C insurance industry contributed $7.4 billion in taxes to federal and provincial governments $44.7 billion In 2011, Canadian insurers wrote $44.7 billion in direct written premiums or $42.8 billion in net written premiums for insurance on consumers homes, cars and businesses Claims paid out to policyholders 9.5 Profit 16.3 More than half of every dollar earned by insurers is paid out in claims 20.5 Yukon Territory ritish Columbia Northwest Territories Alberta Saskatchewan The P&C insurance industry employed 115,400 people across Canada in More than half 77,182 were in Ontario Every province offers some degree of no-fault insurance. Manitoba and Quebec have pure no-fault systems with no right to sue. Other provinces use a mix of no-fault and tort-based systems Of its $141.5 billion in total assets, the P&C insurance industry has $98.4 billion in invested assets $ P&C insurers pay two taxes unique to their industry. They pay a fire tax to some provinces to support fire services in municipalities. And they pay a health care levy to most provinces to pay the public health care system costs for victims of auto collisions $98.4 billion of $141.5 billion IC recently partnered with Crime Stoppers to help Canadians report insurance fraud 6 years 40 years Extreme weather events that used to happen every 40 years can now happen every 6 years P&C insurers are helping prepare Canadians for a major earthquake. Natural Resources Canada predicts that within the next 50 years there is a 30% chance of a significant quake in ritish Columbia and a 5% to 15% chance of one in the Ottawa-Montreal- Quebec City region Taxes Operating expenses including employee compensation FACTS 2013 FACTS 5 Nunavut Manitoba Ontario Quebec Total: 115,400 people pure no-fault systems with no right to sue mix of no-fault and tort-based systems New runswick 77,182 P.E.I. Newfoundland and Labrador Nova Scotia

7 Premiums More than 220 private P&C insurers actively compete in Canada to sell insurance premiums on homes, cars and businesses. These insurers tally premiums in two ways. Direct written premiums are the total premiums received by a P&C insurance company in a year. Net written premiums are the direct written premium amounts adjusted for portions paid in commissions and to reinsurers. In 2011, private Canadian insurers wrote $44.7 billion in direct written premiums or $42.8 billion in net written premiums for insurance on consumers homes, cars and businesses. Of the $42.8 billion in net written premiums in 2011, 47.3% was for one line of business: automobile, including commercial vehicle, insurance. (Figures do not include government-owned auto insurers in ritish Columbia, Saskatchewan, Manitoba and Quebec, which are the exclusive providers of the compulsory component of auto insurance in those provinces.) Personal property, commercial property and liability made up most of the rest. Specialized lines of insurance, such as boiler and machinery, marine and aircraft, and surety and fidelity, make up almost 7% of the business. The smallest portion of the business is accident and sickness insurance, which a few P&C insurance companies sell; the majority of this type of insurance is sold by life and health insurers. Of the $42.8 billion in net written premiums in 2011, 47.3% was for one line of business: automobile, including commercial vehicle, insurance. Despite the importance of insurance to their financial security, consumers are often unsure about what a premium represents. Many think that their premiums are kept in an account just for them in case of a loss. In fact, insurers pool the premiums of all policyholders to cover the losses claimed by the few in any given year. Top 20 private P&C insurers by direct written premiums, 2011 Rank Insurance company 1 Intact Group 15.21% 2 Aviva Group 7.82% 3 RSA Group 5.87% 4 TD Insurance Group 5.79% 5 Co-operators Group 5.52% 6 Wawanesa Mutual Insurance 5.45% 7 State Farm Group 4.42% 8 Lloyd s Underwriters 4.29% 9 Desjardins Group 4.19% 10 Economical Insurance Group 3.91% 11 Northbridge Group 2.98% 12 Dominion of Canada General 2.90% Insurance Company 13 Allstate Group 2.19% 14 Chartis Insurance Company 2.18% 15 RC Group 2.09% 16 Zurich Insurance Company 2.08% 17 La Capitale Financial Group 1.70% 18 Chubb Group 1.56% 19 Genworth Canada 1.25% 20 American ankers Insurance 1.00% Source: IC, MSA FACTS

8 Section one: canada s P&C insurance industry, all sectors premiums Insurers set the price for premiums based on their best estimate of what they will be required to pay out in claims on the policies they wrote. This requirement to estimate future costs is a unique challenge for the insurance business. In most businesses, the actual costs of producing and selling a product can be calculated before the selling price is determined. However, when setting premium prices, P&C insurance companies can only estimate the costs of medical treatments or car or house repairs that they will have to pay sometime in the future. Along with covering claim costs, premiums are calculated to cover taxes, operating expenses and expected profits. Investment income helps to offset costs. Net written premiums (NWP) in $000,000, 1990 to 2011 Auto NWP Personal property NWP Commercial property NWP Liability NWP Other NWP Total NWP ,119 2,272 1,849 1, , ,496 2,492 1,793 1, , ,763 2,642 1,866 1, , ,158 2,803 2,062 1, , ,697 3,042 2,337 1, , ,403 3,163 2,553 1,694 1,201 18, ,597 3,246 2,658 1,867 1,256 18, ,553 3,281 2,711 1,878 1,150 18, ,686 3,383 2,469 1,823 1,198 18, ,839 3,293 2,434 1,846 1,315 18, ,705 3,429 2,591 1,982 1,471 20, ,281 3,481 2,768 2,194 1,519 21, ,150 3,971 3,909 3,145 3,333 27, ,781 4,452 4,518 4,081 2,581 31, ,415 5,079 4,802 4,357 2,622 33, ,430 5,315 4,820 4,600 2,698 33, ,590 5,621 4,985 4,826 2,943 34, ,758 6,033 4,997 4,766 3,540 36, ,140 6,495 5,001 4,624 3,438 36, ,126 7,013 5,313 4,667 3,068 38, ,977 7,598 5,568 4,726 3,416 40, ,239 8,192 6,014 4,817 3,533 42,794 Source: IC, MSA, SCOR, AMF 2013 FACTS 7

9 Section one: canada s P&C insurance industry, all sectors premiums Direct written premiums (DWP) by line, 2011 DWP in $000,000 DWP as % of total business Auto (including commercial vehicles) 20, Personal property 8, Commercial property 6, Liability 5, Specialized 3, Accident and sickness 1, Total business 44, Source: IC, MSA, SCOR, AMF Net written premiums (NWP) by line, 2011 NWP in $000,000 NWP as % of total business Auto (including commercial vehicles) 20, Personal property 8, Commercial property 6, Liability 4, Specialized 2, Accident and sickness Total business 42, Source: IC, MSA, SCOR, AMF FACTS

10 Insurance dollar For each dollar of premium paid to insurers, more than half is paid out in claims. The Insurance Dollar pie chart shows how insurers spend each premium dollar averaged over the seven years from 2004 to Claims paid out to policyholders INSURANCE 9.5 Profit D LLAR 16.3 Taxes 20.5 Operating expenses including employee compensation Source: IC, MSA 2013 FACTS 9

11 Claims In 2011, Canadian P&C insurers paid out $28.6 billion, or 54%, of insurance company revenues in claims. A major trend in claims payments is the increase in insurance claims related to severe weather. Insurance claims resulting from water and wind damage caused by severe weather make up more than half of property insurance claims and are more than claims for fire damage. See Severe Weather, page 17. A note about terminology: Net claims incurred are the total claims cost incurred in the period less any share to be paid by reinsurers. Net claims incurred (NCI) in $000,000, 1990 to 2011 Net claims incurred (NCI) by line, 2011 Auto NCI Personal property NCI Commercial property NCI Liability NCI Other NCI Total NCI NCI in $000,000 NCI as % of total business ,022 1,515 1, , ,799 1,920 1, , ,074 1,907 1,532 1, , ,420 1,974 1,430 1, , ,892 1,955 1,493 1, , ,342 2,003 1,504 1, , ,034 2,301 1,665 1, , ,221 2,112 1,838 1, , ,185 2,523 2,089 1, , ,475 2,152 1,758 1, , ,443 2,286 1,847 1, , ,431 2,316 2,031 1, , ,844 2,352 2,195 2,085 2,019 19, ,028 2,574 2,161 2, , ,081 2,921 2,033 3, , ,626 3,570 3,356 3, , ,968 3,556 2,173 2,577 1,052 20, ,753 3,842 2,589 2, , ,997 4,720 3,157 2,726 1,404 25, ,472 5,071 3,454 2,878 1,464 26, ,205 4,566 3,276 2,766 1,475 27, ,607 5,336 4,087 2,977 1,560 28,567 Auto (including commercial 14, vehicles) Personal property 5, Commercial property 4, Liability 2, Specialized Accident and sickness Total business 28, Source: IC, MSA, SCOR, AMF Source: IC, MSA, SCOR, AMF FACTS

12 Taxes In 2010, the P&C insurance industry contributed $7.4 billion in taxes to federal and provincial governments. Of the $7.4 billion total taxes paid, a portion such as payroll taxes is simply collected by P&C insurers on behalf of governments. The taxes that were borne by the industry in 2010 amount to $5.4 billion. These taxes fall into two categories: income taxes and non-income-based taxes. Nonincome-based taxes typically represent much more money than income taxes. Federal and provincial taxes payable in $000,000, 2010 Income taxes 1,425.5 Capital taxes 1.5 Payroll taxes 1,071.5 Realty and business taxes 31.3 Motor vehicle taxes 0.6 Transaction taxes GST on operations and claims PST on operations and claims PST on premiums (Ont., Que.) Premium taxes 1, , , ,361.0 Transaction subtotal 4,643.5 Health levies Total 7,448.3 Non-income-based taxes are taxes such as provincial insurance premium taxes that are charged regardless of how much net income an insurer makes in a particular year. During a weak financial year, these non-income-based taxes must still be paid, even though net income for insurers has fallen. The relatively high total tax rate for Canadian P&C insurers stems largely from non-income-based taxes. P&C insurers pay two taxes unique to their industry. They pay a fire tax that is collected by some provincial governments to be disbursed to municipalities to support fire services. They also pay a health care levy that is collected by most provincial governments to support the health care system, in particular to pay for the public health system costs for victims of automobile collisions. In 2010, the P&C insurance industry paid $274.3 million in health care levies to various provincial governments. Tax and regulatory costs represent about 13.8% of the average insurance policy premium paid by consumers. Source: IC 2013 FACTS 11

13 Provincial premium, sales and fire tax rates, 2010 Premium tax rate (%) Premium sales tax rate (%) Premium fire tax rate (%) Newfoundland and Labrador 4.00 Prince Edward Island Nova Scotia New runswick Quebec (excluding auto insurance) 3.55* 9.00 Quebec (auto insurance) 3.55* 5.00 Ontario (excluding auto insurance and property insurance) Ontario (property insurance) Ontario (auto insurance) 3.00 Manitoba Saskatchewan (excluding auto and hail insurance) Saskatchewan (auto insurance) 5.00 Saskatchewan (hail insurance) 3.00 Alberta 3.00 ritish Columbia (excluding auto and property insurance) 4.00 ritish Columbia (auto and property insurance) 4.40 Yukon Northwest Territories Nunavut * Quebec rates include a 0.55% compensation tax on insurance premiums. Source: IC FACTS

14 Operating expenses including employee compensation Operating expenses for P&C insurers include such expenses as facilities costs, information technology, market research and employee compensation. Employee compensation is the largest operating expense for P&C insurers. The P&C insurance industry employed 115,400 people across Canada in More than half 77,182 worked in Ontario. Compensation levels in the industry are relatively high compared with most other sectors of the economy. This reflects the advanced skill mix found in the P&C insurance industry. Employment in the insurance industry as a whole, which includes life, health and medical as well as P&C, grew by 8% between 2005 and Growth was highest in New runswick, which saw a 44% increase, due to an expansion of insurance industry customer service facilities in that province. Employee compensation is the largest operating expense for P&C insurers. The P&C insurance industry employed 115,400 people across Canada in Average weekly wage compared to benchmark industries, 2011 Mining and quarrying 1,468.9 Professional, scientific and technical services 1,213.4 Insurance carriers and related activities 1,144.2 Public administration 1,113.8 Information and cultural industries 1,066.0 Hospitals Manufacturing Educational services anking All industries Retail trade Accommodation and food service Source: Statistics Canada Table FACTS 13

15 profit Profit or return on equity in the P&C insurance industry is cyclical, fluctuating around an average of 10.5% for the 35 years since The 2011 industry return on equity was below average at 8.0%. Return on equity comes from two revenue streams underwriting and investment earnings. In 2011, underwriting posted gains for the ninth consecutive year. The 2011 net underwriting revenue was $882 million. Previous to 2003, underwriting posted losses for 24 years in a row. On investment, 2011 was a year of relatively low returns of 4.2%. Return on investment moves in lockstep with the yields for 3- and 5-year Government of Canada bonds, which have been falling for the last two decades. Investment income for 2011 was $4.0 billion. The P&C insurance industry is highly regulated by government and is required by law to invest its assets prudently. More than 80% of invested assets are placed in bonds. Of its $141.5 billion in total assets, the P&C insurance industry has $98.4 billion in invested assets. Of its $141.5 billion in total assets, the P&C insurance industry has $98.4 billion in invested assets. This makes the Canadian P&C insurance industry a major stakeholder and investor in the national economy. P&C insurers invest mainly in domestic government and corporate bonds and in preferred and common stocks. These investments produce a steady flow of income and balance the more variable income from the underwriting side of the business, which posts losses in some years and gains in others. Investments in $000,000 as of December 31, 2011 onds Shares Mortgages Real estate Term deposits Other Total 81,481 11, ,400 1,903 98, % 12.2% 0.6% 0.1% 2.4% 1.9% 100.0% Source: IC, MSA, SCOR, AMF FACTS

16 Section one: canada s P&C insurance industry, all sectors profit Return on equity, return on investment and underwriting ratios, 1990 to 2011 Return on equity Return on investment Earned loss ratio Operating expense ratio Combined ratio % 10.8% 79.1% 31.4% 110.4% % 10.9% 78.6% 32.5% 111.2% % 10.4% 77.7% 32.9% 110.6% % 10.7% 77.1% 32.8% 109.9% % 8.0% 75.7% 31.3% 107.0% % 9.1% 73.3% 30.8% 104.1% % 10.3% 72.7% 30.7% 103.4% % 10.4% 71.4% 31.1% 102.6% % 8.5% 74.9% 32.9% 107.8% % 7.3% 72.6% 33.2% 105.9% % 9.0% 75.9% 32.7% 108.7% % 7.5% 80.0% 31.0% 111.0% % 5.4% 76.9% 28.9% 105.8% % 6.2% 69.9% 28.6% 98.4% % 5.6% 62.7% 28.2% 91.0% % 5.9% 64.7% 28.7% 93.4% % 5.9% 59.5% 28.1% 87.5% % 5.5% 62.5% 28.5% 91.0% % 3.9% 70.3% 30.0% 100.3% % 4.2% 69.5% 30.0% 99.6% % 4.3% 69.1% 30.2% 99.4% % 4.2% 68.2% 30.3% 98.4% Source: IC, MSA, SCOR, AMF A note about terminology: Earned loss ratio is the ratio of claims incurred to net premiums earned. Operating expense ratio is the ratio of operating expenses to net premiums earned. Combined ratio is the ratio of claims and expenses to net premiums earned. When the combined ratio is 100% or more, it signifies an underwriting loss. When the combined ratio is less than 100%, it signifies an underwriting profit FACTS 15

17 Section one: canada s P&C insurance industry, all sectors profit Return on equity, 1975 to % 9.9% 10.6% 11.2% 20% 10% Average ROE* 10.5% ROE Source: IC, excluding Lloyd s Return on investment compared with Government of Canada bond yield, 1989 to % 9% 6% P&C ROI 3% Yield for 3 5 year Government of Canada onds Source: IC, MSA, ank of Canada FACTS

18 Major issues severe weather, catastrophic losses, crime, regulation Severe Weather Damage caused by severe weather has emerged in recent years as the leading cause of property insurance claims and now exceeds fire damage in some regions of the country. Environment Canada reports that extreme weather events that used to happen every 40 years can now be expected to happen every six. The resulting increase in insured losses from natural catastrophes is not a short-term phenomenon. Payouts from extreme weather have more than doubled every five to ten years since the 1980s. For each of the past three years, they have been near or above $1 billion in Canada. In 2011, losses hit $1.7 billion. The P&C insurance industry, through IC, is taking the lead on encouraging communities and consumers to adapt to increasing severe weather by protecting themselves. Industry priorities include municipal infrastructure improvements, sound water management policies, effective Extreme weather events that used to happen every 40 years can now be expected to happen every 6 land use policies, more resilient communities and buildings, updated building codes and climatic design standards. IC is creating a municipal risk assessment tool (MRAT) to help municipalities to measure stormwater and sanitary infrastructure risk in their communities. The overall goal of the industry is to promote adaptation to safeguard Canadians from the impact of severe weather and to control rising claims costs. Catastrophic losses The Slave Lake fire that ravaged a remote area of Alberta and caused $700 million in insured losses in the spring of 2011 was the largest catastrophe of that year. However, the record for losses is still held by the Quebec/Ontario Ice Storm of 1998 with its six days of freezing rain, month-long power outages and $2 billion (in 2011 dollars) in insured losses. Milestone losses of the past decade include the Toronto rains of 2005, which generated claims of $661 million, and the 2011 wind and water damage in Ontario, Quebec and New runswick as a result of Hurricane Irene that cost $239 million. As we can see from the table on next page, the number and cost of natural catastrophes in Canada has increased steadily. This is not just a national phenomenon but part of a worldwide trend FACTS 17

19 Catastrophic losses in Canada in $000,000,000, 1983 to 2011, and trend Source: IC, PCS-Canada, Swiss Re, Munich Re, Deloitte FACTS

20 Section one: canada s P&C insurance industry, all sectors major issues Catastrophic losses by event in $000, 1983 to 2011 This chart includes insured losses by event and yearly totals from 1983 to From 2009 onward, it includes insured losses for the two largest events in the year and yearly totals. These figures are reported by Property Claim Services Canada (PCS-Canada), a service that tracks insured losses arising from catastrophic events in Canada. Insured losses for all events are available through subscription to PCS-Canada. Date and place Event Loss + loss adjustment expenses Loss + loss adjustment expenses in 2011 dollars 1983 July 9, Saskatchewan Storm 16,385 33, Aug. 3, Edmonton Storm 22,060 45,525 Total ,445 79, April 30, ruce County ON Wind 39,066 77,294 Total ,066 77, May 30, Leamington ON Storm 16,390 31, May 31, arrie ON Tornado 83, ,718 Total , , May 29, Montreal Hail 45,473 83,113 Total ,473 83, May 29, Montreal Hail 24,891 43, July 14, Montreal Storm 44,678 78, July 31, Edmonton Tornado 148, ,714 Total , , June 7, Medicine Hat A Tornado 50,027 84, July 6, Slave Lake A Flooding 21,500 36, Aug.16, Calgary Hail 37,127 62,521 Total , , July 20, Harrow ON Flooding 13,807 22,132 Total ,807 22, July 9, Calgary Hail 16,279 24,896 Total ,279 24,896 Source 1983 to 2008 : IC, PCS-Canada, Swiss Re, Munich Re and Deloitte Source 2009, 2011: PCS-Canada Source 2010: PCS-Canada, IC 2013 FACTS 19

21 Date and place Event Loss + loss adjustment expenses Loss + loss adjustment expenses in 2011 dollars 1991 March 27 28, Sarnia ON Tornado 25,407 36, July 3, Red Deer A Storm 28,202 40, Aug. 27, Maskinongé QC Tornado 17,667 25, Sept. 7, Calgary Hail 342, , Nov. 30, Ontario Wind 5,429 7,862 Total , , July 31, Calgary Hail 22,078 31, July 31, Toronto Flooding 4,898 6, Aug. 28, Alberta Hail 5,263 7, Aug. 28, Elmira and Aurora ON Flooding 4,348 6, Sept. 1, Alberta Hail 7,421 10, Oct. 6 7, Avalon NL Wind 8,216 11, Nov , southern Ontario Wind 36,437 52, Nov , Quebec Wind 12,056 17,209 Total , , March 13 14, Quebec Storm 18,447 25, July 25 Aug.14, Winnipeg Flooding 184, , July 29 30, Alberta Hail 8,116 11, July 29, Saskatchewan Flooding 5,383 7, July 29 30, Quebec Flooding 7,624 10,679 Total , , Jan , southern Ontario Flooding 13,145 18, Jan. 28, southern Ontario Storm 6,250 8, May 18, southern Manitoba Storm 8,260 11, May 22, Saskatchewan Storm 8,666 12, June 18, southern Alberta Hail 8,263 11, Aug. 4, Salmon Arm C Storm 10,225 14, Aug. 4, Aylmer QC Tornado 6,911 9, Aug. 27, southern Manitoba Hail 8,112 11, Aug. 28, southern Ontario Storm 7,219 10,100 Total , ,799 Source 1983 to 2008 : IC, PCS-Canada, Swiss Re, Munich Re and Deloitte Source 2009, 2011: PCS-Canada Source 2010: PCS-Canada, IC FACTS

22 Section one: canada s P&C insurance industry, all sectors major issues Date and place Event Loss + loss adjustment expenses Loss + loss adjustment expenses in 2011 dollars 1995 June 6 9, Calgary Flooding 20,764 28, July 4, Edmonton Hail 14,698 20, July 10, southern Alberta Hail 26,389 36, July 13 15, southern Ontario Storm 53,439 73, July 17, Calgary Hail 52,304 71, July 30, southern Manitoba Storm 8,468 11, Aug. 26, Regina Storm 12,294 16, Oct. 5 6, Hamilton ON Storm 16,325 22,344 Total , , July 16, Winnipeg Flooding/hail 146, , July 16 18, Calgary Hail 119, , July 24 25, Calgary Hail 85, , July 19 20, Saguenay QC Flooding 207, , July 23, Outaouais QC Wind/hail 1,571 2, Aug. 8, Ottawa Flooding 20,257 27, Aug. 8, Outaouais and Estrie QC Flooding 7,882 10, Nov. 9, Montreal and Quebec City Flooding 76, ,556 Total , , Feb. 27, Niagara Peninsula ON Wind 23,776 31, April 6 7, Sudbury ON Flooding 20,558 27, July 14 15, Chambly QC Flooding 29,865 39,611 Total ,199 98, Jan., southern Quebec Ice storm 1,384,100 1,817, Jan., eastern Ontario Ice storm 170, , Jan., southern New runswick Ice storm 20,000 26, July 4 9, Calgary Hail 69,742 91, Sept , Niagara Peninsula ON Wind 63,403 83,264 Total ,707,245 2,242,042 Source 1983 to 2008 : IC, PCS-Canada, Swiss Re, Munich Re and Deloitte Source 2009, 2011: PCS-Canada Source 2010: PCS-Canada, IC 2013 FACTS 21

23 Date and place Event Loss + loss adjustment expenses Loss + loss adjustment expenses in 2011 dollars 1999 Jan., southern Ontario Snowstorm 120, , June 5, Drummondville QC Hail 20,555 26, July 5 6, Quebec Wind 43,321 55, July 28, Atlantic provinces Flooding 15,756 20, Sept. 22, Atlantic provinces Flooding 15,648 20,195 Total , , May 12, southern Ontario Storm 128, , July 7, southern Manitoba Storm 18,559 23, July 14, Pine Lake A Tornado 17,916 22, Aug. 9, Calgary Storm 28,058 35, Oct. 30, Sydney NS Flooding 4,010 5, Dec. 17, Atlantic provinces Wind 19,756 24,830 Total , , Feb. 1, Atlantic provinces Snowstorm 13,746 16, Feb. 8, southern Ontario Storm 54,078 66, Feb. 8, Quebec Storm 53,843 66, July 13, Alberta Storm 25,513 31, July 28, Edmonton Storm 23,902 29, Sept. 19, Atlantic provinces Flooding 6,362 7, Dec. 14, southwestern ritish Columbia Wind 27,035 33,145 Total , , Jan. 31, southern Ontario Wind 34,508 41, March 9, Ontario Wind 110, , June 8, southern Alberta Flooding 42,828 51, June 10, southern Ontario Storm 53,943 64, July 26, southwestern Ontario Storm 60,060 72,011 Total , ,491 Source 1983 to 2008 : IC, PCS-Canada, Swiss Re, Munich Re and Deloitte Source 2009, 2011: PCS-Canada Source 2010: PCS-Canada, IC FACTS

24 Section one: canada s P&C insurance industry, all sectors major issues Date and place Event Loss + loss adjustment expenses Loss + loss adjustment expenses in 2011 dollars 2003 March 30 April 1, New runswick Flooding 4,695 5, March 30 April 1, Newfoundland and Labrador Flooding March 30 April 1, Prince Edward Island Flooding March 30 April 1, Nova Scotia Flooding 18,557 21, Aug , Alberta Wind/hail 33,565 39, Aug , Saskatchewan Wind/hail 29,055 33, Summer, ritish Columbia Forest fires 200, , Sept , Prince Edward Island Hurricane 6,665 7, Sept , Nova Scotia Hurricane 132, ,740 Total , , July 2 11, Edmonton Hail 166, , July 15, Calgary Hail 21,500 24, July 15, Peterborough ON Flooding 87,303 99, Sept. 9, eastern Ontario Rainstorm 57,600 65,962 Total , , June 6 8 and June 17 19, Alberta Flooding 300, , June and July 1 2, Manitoba Flooding 60,000 67, July 5 and Sept. 26, Quebec Rainstorm 57,000 63, Aug. 19, Ontario Wind/rainstorm 625, ,674 Total ,042,400 1,166, Feb. 6, ritish Columbia Storm 6,406 7, Aug. 10, Alberta Hail 13,593 14, Sept. 24, Greater Toronto Area Wind/hail 4,628 5, Nov.15 Dec. 15, ritish Columbia Storm 133, ,260 Total , ,326 Source 1983 to 2008 : IC, PCS-Canada, Swiss Re, Munich Re and Deloitte Source 2009, 2011: PCS-Canada Source 2010: PCS-Canada, IC 2013 FACTS 23

25 Date and place Event Loss + loss adjustment expenses Loss + loss adjustment expenses in 2011 dollars 2007 Jan. 5, ritish Columbia Storm 16,235 17, June 5, Alberta Storm 44,621 47, June 22 24, Manitoba Storm 17,607 18, Summer, Manitoba Storm 47,400 50, July 7, Alberta Forest fires 7,376 7, July 28 29, Alberta Hail 16,581 17, Aug. 1, Newfoundland and Labrador Wind 6,039 6,494 Total , , Jan. 9, Ontario Storm 28,017 29, April/May, New runswick Flooding 8,010 8, June 10, several regions in Quebec Hail 125, , July, Lethbridge A Wind/hail 20,500 21, Sept., Saskatchewan Hail 132, , Dec., ritish Columbia Snowstorm 60,000 63,050 Total , , Feb , Ontario Snowstorm 2009 April 25 27, Ontario Snowstorm 2009 July 11 13, Hamilton and Ottawa ON, Montreal and Mirabel QC Heavy rains 227, , July 24 28, Ontario Heavy rains 376, , Aug. 1 3, Alberta Wind 2009 Aug , Manitoba Hail 2009 Aug. 20, southern Ontario Storm/tornadoes 2009 Aug. 23, New runswick and Newfoundland and Labrador Hurricane ill 2009 Aug. 29, New runswick, Newfoundland and Labrador, and Quebec Tropical Storm Danny Total ,510 1,037,083 Source 1983 to 2008 : IC, PCS-Canada, Swiss Re, Munich Re and Deloitte Source 2009, 2011: PCS-Canada Source 2010: PCS-Canada, IC FACTS

26 Section one: canada s P&C insurance industry, all sectors major issues Date and place Event Loss + loss adjustment expenses Loss + loss adjustment expenses in 2011 dollars 2010 March 13, Toronto and Hamilton ON Wind/thunderstorm 2010 June 5 6, Leamington and Windsor/ Essex County ON Wind/thunderstorm 127, , July 1 3, Swift Current, Wynyard and Hudson ay region SK Wind/thunderstorm 2010 July 12 13, Calgary and southern Alberta Wind/thunderstorm 530, , Sept , Newfoundland and Labrador Hurricane Igor 2010 Dec., Atlantic provinces Storm Total , , March 5 7, Ontario and Quebec Snowstorm 2011 April 27 28, Ontario and Quebec Wind/thunderstorm 2011 May 14 17, Slave Lake A Fire 742, , July 18 19, Alberta, Manitoba and Saskatchewan Wind/thunderstorm 2011 Aug. 21, Goderich ON Wind/thunderstorm 2011 Aug , New runswick, Quebec and Ontario Wind/thunderstorm (remnants of 238, ,500 Hurricane Irene) 2011 Nov. 27, Alberta Wind/thunderstorm Total ,706,600 1,706,600 Source 1983 to 2008 : IC, PCS-Canada, Swiss Re, Munich Re and Deloitte Source 2009, 2011: PCS-Canada Source 2010: PCS-Canada, IC 2013 FACTS 25

27 Section one: canada s P&C insurance industry, all sectors major issues Crime Insurance crime takes many forms and costs Canadian insurers millions each year. The cost of insurance crime is reflected in higher premium levels. A significant amount of insurance crime involves opportunistic fraud whereby individual policyholders make false or exaggerated claims. Organized crime rings also perpetrate various forms of insurance crime, such as auto theft, staged collisions and associated service provider fraud in which participants make false claims for accident benefits and vehicle damage in collusion with health and rehabilitation facilities and auto repair shops. The P&C insurance industry, through IC, investigates organized insurance crime throughout Canada. IC also advocates for a coordinated approach to law enforcement that includes sharing information on investigations and prosecutions across national and international jurisdictions. Regulation Regulating the P&C insurance industry is the responsibility of both federal and provincial governments. Regulations related to solvency or the ability of insurers to meet their financial obligations to policyholders are generally the responsibility of the federal Office of the Superintendent of Financial Institutions (OSFI). The regulation of market conduct or insurers responsibility to treat customers fairly including setting fair insurance rates falls within the mandate of provincial governments. While it is not possible to determine the total cost to the industry of compliance with regulatory requirements, it is believed that these costs are very significant and could be as high as hundreds of millions of dollars. The industry pays about $70 million a year in direct costs to comply with regulatory practices plus much more in indirect costs. The P&C industry, via IC, advocates for an even-handed approach that strikes the right balance between regulation to ensure a level playing field for business and to strengthen public confidence in the insurance market on the one hand, and not burdening the public with expensive and unnecessary regulations on the other hand. The regulatory presence is particularly strong for auto insurance where, typically, there are strict rules governing claims handling, underwriting and complaints management. These are intended to protect consumers against unfair or otherwise inappropriate market practices. Provincial regulators are also active in administering auto insurance rate approval systems. In some cases, these systems can be cumbersome and costly while also causing delays in the industry s ability to respond to changing market conditions. The P&C industry, through IC, engages regulators from the federal and provincial governments on a regular basis in efforts to ensure that new regulatory initiatives are well justified and do not result in excessive burdens on the industry and/or costs to consumers. An important theme of these efforts is to encourage harmonization across provincial and territorial jurisdictions of legislative and regulatory frameworks for insurance. Success in this area could bring significant benefits to consumers by enhancing the efficiency and cost effectiveness of insurance regulations FACTS

28 Section two: Canada s P&C insurance industry by line 2013 FACTS 27

29 Auto insurance In 2010, auto insurance, which is required by law in every Canadian province, accounted for approximately half the insurance written by P&C insurers. Auto insurance covers the driver, passengers, pedestrians and property involved in a vehicle collision. Approximately 100 private P&C insurance companies compete for auto insurance business in Canada. In addition to these private insurers, government-owned insurers in ritish Columbia, Saskatchewan, Manitoba and Quebec are the providers of the compulsory component of auto insurance in those provinces. Compulsory insurance There are three kinds of compulsory coverage: Accident benefits (A) coverage pays for medical treatment, income replacement and other benefits to aid the recovery of collision victims, including drivers, passengers and pedestrians. This coverage also provides funeral expenses and survivor benefits in the case of a death. This insurance is compulsory in all provinces except Newfoundland and Labrador. In some provinces, it is referred to as Section benefits. Accident benefits are paid on a no-fault basis. This means that the benefits are available to anyone injured in a collision regardless of whether he or she is at fault in the collision. See the next page for more detail on no-fault insurance. Third-party liability (TPL) coverage protects an insured driver and/or owner of the vehicle in the event that someone is killed, is injured or suffers property damage as a result of the driver s negligence. Third-party liability is compulsory in all provinces, and in some provinces may include direct compensation property damage (DCPD) coverage. DCPD covers damage to an insured vehicle and to property within the vehicle when another motorist is responsible for the collision. It is called direct compensation because insured parties collect from their own insurers, even though someone else is at fault. DCPD is currently compulsory in Ontario, New runswick and Quebec, and is scheduled to become compulsory in Nova Scotia on April 1, Underinsured motorist protection provides insureds in ritish Columbia with up to $1 million in coverage for an injury or death caused by an underinsured driver. For example, an at-fault driver with the basic minimum coverage of $200,000 may have no personal wealth or future earnings potential from which to pay amounts above the policy limit. This $1 million coverage ensures that victims are not disadvantaged by such circumstances. Other jurisdictions in Canada provide similar coverage as part of the basic mandatory policy FACTS

30 Section two: canada s p&c insurance industry by line auto insurance Optional insurance Collision and comprehensive insurance are optional in all provinces except Saskatchewan and Manitoba, where both are compulsory. Collision coverage pays for the cost of repairing or replacing a vehicle following a collision with another vehicle or No-fault insurance The concept of no-fault insurance developed over time as a way to reduce costs associated with having to prove fault. efore no fault, insurers operated only under a tort-based system that required the parties to establish which driver was at fault with the insurer of the at-fault driver responsible to cover the losses from injuries resulting from the incident. This process was lengthy and required expensive investigation and often litigation. Under no-fault insurance, insurers pay for the accident benefit claims of their own clients regardless of fault. object, such as a tree, house, animal, guardrail or pothole. Comprehensive coverage pays for repairs to or replacement of a vehicle for damage caused by something other than a collision. The most common insured perils include fire, theft, vandalism and wind. As a result of no-fault insurance, claims are easier and faster to process. In most provinces, the driver who did not cause the collision also has the right to sue the at-fault driver for additional costs and damages above the limit of the coverage. Every province offers some degree of no-fault insurance. Two provinces Manitoba and Quebec have pure nofault systems, with no right to sue. Other provinces use a mix of no-fault and tort-based systems that specify accident benefits limits and the right to sue for additional compensation under certain specified situations, such as when injuries are recognized as permanent and serious. Yukon Territory Northwest Territories Nunavut Every province offers some degree of no-fault insurance. ritish Columbia Alberta Saskatchewan Manitoba Quebec Newfoundland and Labrador pure no-fault systems with no right to sue Ontario P.E.I. Nova Scotia mix of no-fault and tort-based systems New runswick 2013 FACTS 29

31 What s compulsory where Auto insurance comes under provincial jurisdiction, so the rules are slightly different in each province. The chart below comparing provincial regulations has been abbreviated for space and edited for consistency and clarity. The information is for educational purposes only; consult a qualified professional for further assistance. A note about terminology: some provincial acts refer to spouse and some to spouse/partner, which have different definitions. Some provinces use the term unpaid housekeeper, which is called homemaker or non-earner benefit in other provinces. Head of household is usually defined as the spouse or partner with the largest income in the previous 12 months. For full legal terminology, see the links under the Sources heading for each province. Comparison of compulsory private passenger auto insurance coverage by province as of April 1, 2012 Compulsory minimum third-party liability: Medical payments: Funeral expense benefits: $2,500 Disability income benefits: Death benefits: Impairment benefits: Right to sue for pain and suffering? Right to sue for economic loss in excess of no-fault benefits? Administration: ritish Columbia $200,000 is available for any one accident; however, if a claim involving both bodily injury and property damage reaches this figure, payment for property damage will be capped at $20,000 Up to $150,000/person 75% of gross weekly wages to maximum $300/week; 104 weeks for temporary disability, lifetime for total disability; nothing is payable for the first seven days of disability; homemaker up to $145/week, maximum 104 weeks Death of head of household $5,000, plus $145/week for 104 weeks to first survivor, plus $1,000 and $35/week for 104 weeks to each child; death of spouse/ partner of head of household $2,500; death of dependent child, according to age, maximum $1,500 Through tort action Yes Yes Government (government and private insurers compete for optional and additional coverage) Sources: ICC Autoplan Insurance, 2012, FACTS

32 Section two: canada s p&c insurance industry by line auto insurance Compulsory minimum third-party liability: Medical payments: Alberta Funeral expense benefits: $5,000 Disability income benefits: $200,000 is available for any one accident; however, if a claim involving both bodily injury and property damage reaches this figure, payment for property damage will be capped at $10,000 Up to $50,000/person 80% of gross weekly wages to maximum $400/week; up to 104 weeks for total disability; nothing is payable for the first seven days of disability; non-earner benefit (unemployed person 18 years or older) $135/week, for up to 26 weeks Death benefits: Death any time after accident; death of head of household $10,000, plus 20% ($2,000) for each dependent survivor after first, plus additional $15,000 for first survivor and $4,000 for each remaining survivor; death of spouse/adult interdependent partner of head of household $10,000; death of dependent relative, according to age, maximum $3,000; grief counselling up to $400 per family with respect to death of any one person Impairment benefits: Right to sue for pain and suffering? Right to sue for economic loss in excess of no-fault benefits? Administration: Through tort action Yes. If injury is deemed minor under provincial legislation, maximum award is $4,641 Yes Private insurers Sources: Minor Injury Regulation, 2012, Automobile Accident Insurance enefits Regulations, Alberta Regulation 352/1972, 2012, Alberta Standard Automobile Policy, S.P.F. No. 1, 2012, accessed at: FACTS 31

33 Compulsory minimum third-party liability: Medical payments: Saskatchewan Funeral expense benefits: If no-fault option selected: $9,376 If tort option selected: $6,110 Disability income benefits: $200,000 is available for any one accident; however, if a claim involving both bodily injury and property damage reaches this figure, payment for property damage will be capped at $10,000 If no-fault option selected: Up to $6,250,817/person If tort option selected: Up to $24,440/person for non-catastrophic injury, up to $183,308 for catastrophic injury If no-fault option selected: 90% of net wages based on gross annual income to maximum $82,804/year; nothing is payable for the first seven days of disability unless catastrophically injured If tort option selected: Up to two years; $368/week for total disability, $184/week for partial disability; maximum $19,136/year Death benefits: If no-fault option selected: 45% of deceased s net income; minimum $64,486 to spouse; 5% of calculated death benefits to each dependent child; if no spouse, $14,330 to each surviving parent or child (21 years or older), to maximum $64,486; death of dependent child $28,660 If tort option selected: 45% of deceased s net income; minimum $54,992 to spouse; 5% of calculated death benefits to each dependent child; if no spouse or dependant, estate receives up to $12,220 Impairment benefits: Right to sue for pain and suffering? Right to sue for economic loss in excess of no-fault benefits? Administration: If no-fault option selected: Up to $179,126/person for non-catastrophic injury, up to $218,779 for catastrophic injury If tort option selected: Up to $12,220/person for non-catastrophic injury, up to $158,867 for catastrophic injury If no-fault option selected: No If tort option selected: Yes, subject to deductible of $5,000 If no-fault option selected: Yes If tort option selected: Yes Government (government and private insurers compete for optional and additional coverage) Sources: Saskatchewan Government Insurance (SGI), No Fault vs. Tort liability, 2012, Saskatchewan Government Insurance (SGI), Your Guide to Tort Coverage, 2012, Saskatchewan Government Insurance (SGI), Your Guide to No Fault Coverage, 2012, FACTS

34 Section two: canada s p&c insurance industry by line auto insurance Compulsory minimum third-party liability: Medical payments: Manitoba Funeral expense benefits: $7,753 Disability income benefits: Death benefits: Impairment benefits: Right to sue for pain and suffering? Right to sue for economic loss in excess of no-fault benefits? Administration: $200,000 is available for any one accident; however, if a claim involving both bodily injury and property damage reaches this figure, payment for property damage will be capped at $20,000 No time or amount limit 90% of net wages based on gross annual income of maximum $85,500/year; nothing is payable for the first seven days of disability Death any time after injury; benefits for partners depend on wage and age of deceased and range from $56,888 to $427,500; benefits for dependent children depend on their age and range from $26,234 to $48,327; disabled dependants receive an additional $24,888; non-dependent children or parents receive $12,668 Minimum $710/week to a maximum total of $142,215 for non-catastrophic injury; minimum $780/week to a maximum total of $218,020 for catastrophic injury No No Government (government and private insurers compete for optional and additional coverage) Sources: Manitoba Public Insurance, Guide to Autopac, 2012, Manitoba Public Insurance, Personal Injury Protection Plan, PIPP enefits, 2012, FACTS 33

35 Ontario Compulsory minimum third-party liability: Medical payments: Funeral expense benefits: Disability income benefits: Death benefits: Impairment benefits: Right to sue for pain and suffering? Right to sue for economic loss in excess of no-fault benefits? Administration: $200,000 is available for any one accident; however, if a claim involving both bodily injury and property damage reaches this figure, payment for property damage will be capped at $10,000 Up to $3,500 for minor injury; up to $50,000/person for non-minor and non-catastrophic injury for up to 10 years; up to $1 million for catastrophic injury; attendant care up to $36,000 for non-minor and non-catastrophic injury up to 104 weeks; up to $1 million for catastrophic injury $6,000 (if optional indexation coverage is purchased, this amount may be higher) Income Replacement enefit: 70% of gross wages to maximum $400/week, minimum $185/week for 104 weeks (longer if victim is unable to pursue any suitable occupation); nothing is payable for the first seven days of disability Non-earner enefit (disabled unemployed persons, students enrolled in education full time, or students who completed their education less than one year before the accident and are not employed): $185/week for 104 weeks; 26-week wait; limit two years; if student (as defined above) is still disabled after 104 weeks, Non-earner enefit is $320/week. Not available if the insured is eligible for, and elects to receive, the income replacement or caregiver benefit Death within 180 days of accident (or three years if continuously disabled prior to death); $25,000 minimum to spouse, $10,000 to each surviving dependant, $10,000 to each parent/guardian (if optional indexation coverage is purchased, these amounts may be higher) Through tort action Yes, if injury meets severity test (called threshold ), and subject to deductible. Lawsuit allowed only if injured person dies or sustains permanent and serious disfigurement and/or impairment of important physical, mental or psychological function. The court assesses damages and deducts $30,000 ($15,000 for a Family Law Act claim) Yes. Income replacement award above no-fault benefit is based on net income after deductions for income tax, Canada Pension and Employment Insurance. Injured person may sue for 70% of net income loss before trial, 100% of gross after trial; also for medical, rehabilitation and related costs when injury meets severity test for pain and suffering claims Private insurers Sources: The Financial Services Commission of Ontario, Ontario Automobile Policy, 2012, Insurance Act, Ontario Regulation 403/96, The Financial Services Commission of Ontario, Publications and Resources, 2012, FACTS

36 Section two: canada s p&c insurance industry by line auto insurance Compulsory minimum third-party liability: Medical payments: Quebec Funeral expense benefits: $4,826 Disability income benefits: Death benefits: $50,000 is available for any one accident; liability limits relate to property damage claims within Quebec and to personal injury and property damage claims outside Quebec No time or amount limit Impairment benefits: Up to $225,822 Right to sue for pain and suffering? Right to sue for economic loss in excess of no-fault benefits? Administration: 90% of net wages based on gross annual income of maximum $66,000/year; nothing is payable for the first seven days of disability; indexed Death any time after accident; benefits depend on gross annual income multiplied by a factor between one and five, depending on age of the victim; benefits for spouse range from $64,400 to $330,000; benefits for dependent children depend on their age and range from $30,588 to $56,352; if there is no surviving spouse/ dependants, parents or estate receive $51,617 No No odily injury: government; property damage: private insurers Sources: Société de l assurance automobile du Québec, The Insurance Policy for All Quebecers, 2012, Société de l assurance automobile du Québec, Compensation table, 2012, Société de l assurance automobile du Québec, Table of Death enefits, Quebec Automobile Insurance Policy Q.P.F. No.1, FACTS 35

37 Compulsory minimum third-party liability: Medical payments: Funeral expense benefits: $2,500 Disability income benefits: Death benefits: Impairment benefits: Right to sue for pain and suffering? Right to sue for economic loss in excess of no-fault benefits? Administration: New runswick $200,000 is available for any one accident; however, if a claim involving both bodily injury and property damage reaches this figure, payment for property damage will be capped at $20,000 Up to $50,000/person; four-year time limit Maximum $250/week; 104 weeks for partial disability, lifetime for total disability; must be disabled for at least seven days to qualify; unpaid housekeeper $100/ week, maximum 52 weeks Death within 180 days after accident (or two years if continuously disabled prior to death); death of head of household $50,000, plus $1,000 to each dependent survivor after first; death of spouse/partner of head of household $25,000; death of dependant $5,000 Through tort action Yes. If injury is deemed minor under provincial legislation, maximum award is $2,500 Yes Private insurers Sources: New runswick Standard Owner s Policy N..P.F. No.1, FACTS

38 Section two: canada s p&c insurance industry by line auto insurance Nova Scotia Compulsory minimum third-party liability: Medical payments: Funeral expense benefits: Disability income benefits: Death benefits: Impairment benefits: Right to sue for pain and suffering? Right to sue for economic loss in excess of no-fault benefits? Administration: $500,000 is available for any one accident Up to $50,000/person; four-year time limit (Consumers have option to purchase additional coverage) $2,500 (Consumers have option to purchase additional coverage) Maximum $250/week; 104 weeks for partial disability, lifetime for total disability; must be disabled for at least seven days to qualify; unpaid housekeeper $100/ week, maximum 12 weeks (Consumers have option to purchase additional coverage) Death within 180 days after accident (or two years if continuously disabled prior to death); death of head of household $25,000, plus $1,000 to each dependent survivor after first; death of spouse/partner $25,000; death of dependant $5,000 (Consumers have option to purchase additional coverage) Through tort action Yes. If injury is deemed minor under provincial legislation, maximum award is $7,956 Yes Private insurers Sources: Nova Scotia Standard Automobile Policy S.P.F. No.1, 2005, FACTS 37

39 Compulsory minimum third-party liability: Medical payments: Funeral expense benefits: $1,000 Disability income benefits: Death benefits: Impairment benefits: Right to sue for pain and suffering? Right to sue for economic loss in excess of no-fault benefits? Administration: Prince Edward Island $200,000 is available for any one accident; however, if a claim involving both bodily injury and property damage reaches this figure, payment for property damage will be capped at $10,000 Up to $25,000/person; four-year time limit Maximum $140/week; 104 weeks for partial disability, lifetime for total disability; must be disabled for at least seven days to qualify; unpaid housekeeper $70/ week, maximum 12 weeks Death within 180 days after accident (or two years if continuously disabled prior to death); death of head of household $10,000, plus $1,000 to each dependent survivor after first; death of spouse of head of household $10,000; death of dependant $2,000 Through tort action Yes. If injury deemed minor under provincial regulation, maximum award is $2,500 Yes Private insurers Sources: Prince Edward Island Standard Automobile Policy S.P.F. No.1 (not available online) FACTS

40 Section two: canada s p&c insurance industry by line auto insurance Compulsory minimum third-party liability: Medical payments: Newfoundland and Labrador Funeral expense benefits: (Optional to buy) $1,000 Disability income benefits: Death benefits: Impairment benefits: $200,000 is available for any one accident; however, if a claim involving both bodily injury and property damage reaches this figure, payment for property damage will be capped at $20,000 (Optional to buy) Up to $25,000/person; four-year time limit (Optional to buy) Maximum $140/week; 104 weeks for partial disability, lifetime for total disability; must be disabled for at least seven days to qualify; unpaid housekeeper $70/week, maximum 12 weeks (Optional to buy) Death within 180 days after accident (or two years if continuously disabled prior to death); death of head of household $10,000, plus $1,000 to each dependent survivor after first; death of spouse $10,000; death of dependant $2,000 Through tort action Right to sue for pain and suffering? Yes. Awards are subject to deductible of $2,500 Right to sue for economic loss in excess of no-fault benefits? Administration: Yes Private insurers Sources: Automobile Insurance Act, Chapter A-22, an Act Respecting Automobile Insurance, Newfoundland & Labrador Standard Automobile Policy S.P.F. No.1 (not available online) 2013 FACTS 39

41 Compulsory minimum third-party liability: Medical payments: Yukon Funeral expense benefits: $2,000 Disability income benefits: Death benefits: Impairment benefits: Right to sue for pain and suffering? Right to sue for economic loss in excess of no-fault benefits? Administration: $200,000 is available for any one accident; however, if a claim involving both bodily injury and property damage reaches this figure, payment for property damage will be capped at $10,000 Up to $10,000/person; two-year time limit 80% of gross weekly wages to maximum $300/week; 104 weeks for temporary or total disability; nothing is payable for the first seven days of disability; unpaid housekeeper $100/week, maximum 26 weeks Death any time after accident; death of head of household $10,000, plus $2,000 to each dependent survivor other than the first, and 1% of total principal sum to each dependant/survivor after first, for 104 weeks; death of spouse of head of household $10,000; death of dependent relative, according to age, maximum $3,000 Through tort action Yes Yes Private insurers Sources: Insurance Act, O.I.C. 1988/090, Schedule of enefits, Yukon Territories Standard Automobile Policy S.P.F. No.1 (not available online) FACTS

42 Section two: canada s p&c insurance industry by line auto insurance Compulsory minimum third-party liability: Medical payments: Funeral expense benefits: $1,000 Disability income benefits: Death benefits: Impairment benefits: Right to sue for pain and suffering? Right to sue for economic loss in excess of no-fault benefits? Administration: Northwest Territories and Nunavut $200,000 is available for any one accident; however, if a claim involving both bodily injury and property damage reaches this figure, payment for property damage will be capped at $10,000 Up to $25,000/person; four-year time limit 80% of gross weekly wages to maximum $140/week; 104 weeks for temporary disability; lifetime for total disability; nothing is payable for the first seven days of disability; unpaid housekeeper $100/week, maximum 12 weeks Death within 180 days after accident (or two years if continuously disabled prior to death); death of head of household $10,000, plus $1,500 to single survivor or $2,500 to each survivor after first if more than one; death of spouse of head of household $10,000; death of dependant $2,000 Through tort action Yes Yes Private insurers Sources: Northwest Territories Insurance Act, R.S.N.W.T. 1988, c.i-4, Northwest Territories Standard Automobile Policy S.P.F. No.1 (not available online) Nunavut Insurance Act, R.S.N.W.T.1988, c.i-4, (search Insurance act in title); Nunavut Territories Standard Automobile Policy S.P.F. No.1 (not available online) 2013 FACTS 41

43 Premiums and claims Private insurers wrote policies providing them with $20.3 billion in net written premiums for auto insurance in In 2011, Canadian private P&C insurers paid out $14.6 billion in net claims incurred to policyholders for all types of auto insurance coverages: third-party liability, accident benefits, collision and comprehensive, and other coverages. Thirdparty liability claims payouts made up the largest percentage at 50.2%. The vast majority of claims 95% are for incidents involving private passenger vehicles. For a complete breakdown of how each dollar collected by insurers is spent, see Insurance Dollar, page 9. A note about terminology: The tables on page 42 and 43 show claims costs by accident year, which is how much insurers will pay out for claims that occurred in that year (although in some instances claims may be paid in future years). Private passenger auto insurance claims, 2011 Third-party liability (includes DCPD where applicable) Accident benefits Collision Comprehensive Number of insured vehicles 10,401,220 10,375,192 7,159,505 8,204,454 Number of claims 349, , , ,838 Total cost of claims in $000 4,474,397 2,109,092 1,258, ,952 Source: 2011 GISA Automobile Insurance Experience Exhibits Commercial auto insurance claims, 2011 Third-party liability (includes DCPD where applicable) Accident benefits Collision Comprehensive Number of insured vehicles 963, , , ,817 Number of claims 20,652 2,419 7,963 10,356 Total cost of claims in $ ,367 81,849 74,140 59,885 Source: 2011 GISA Automobile Insurance Experience Exhibits FACTS

44 Section two: canada s p&c insurance industry by line auto insurance Cost of claims for private passenger auto by type of coverage in $000, 1990 to 2011 Third-party liability (includes DCPD where applicable) Accident benefit Collision Comprehensive Other* Total ,035, , , , ,197 4,046, ,557, , , , ,617 3,970, ,690, , , , ,816 4,134, ,875,979 1,080, , , ,243 4,480, ,799,100 1,484, , , ,433 4,817, ,832,904 1,423, , , ,959 4,812, ,011,733 1,473, , , ,214 5,051, ,369,076 1,015, , , ,016 4,847, ,643,901 1,162, , , ,623 5,375, ,025,406 1,363, , , ,250 6,030, ,298,096 1,627, , , ,088 6,797, ,467,940 1,783, , , ,903 7,192, ,715,330 2,131,675 1,061, , ,414 7,895, ,524,590 1,987,078 1,005, , ,042 7,474, ,212,161 1,720, , , ,793 6,754, ,243,641 1,885, , , ,771 7,052, ,452,015 2,159,338 1,059, , ,183 7,618, ,790,247 2,497,970 1,240, , ,118 8,606, ,850,839 2,796,795 1,261, , ,867 9,026, ,190,326 3,995,939 1,204, , ,907 10,541, ,385,795 4,065,808 1,154, , ,135 10,790, ,468,926 2,107,125 1,254, , ,173 8,963,175 Source: IC Economic Trends, with data from GISA Figures may not add up to 100% as a result of rounding. *Includes uninsured auto, underinsured motorist, all perils and specified perils 2013 FACTS 43

45 Average losses Insurers track loss amounts in two ways. They calculate the average cost per claim (severity) and the average cost per insured vehicle (loss cost). The average cost per claim is calculated by dividing the total cost of claims by the number of claims. In 2011, the national average cost per claim for private passenger auto insurance claims was $8,983,699,649 1,018,663 = $8,819. The average cost per insured vehicle is calculated by dividing the total cost of claims by the number of insured vehicles. In 2011, the national average cost per insured private passenger vehicle was $8,983,699,649 10,401,220 = $ Average cost per claim by type of coverage for private passenger automobile insurance, 2007 to 2011 Type of coverage Third-party liability 11,747 11,538 12,251 12,570 12,808 Accident benefits 25,374 28,918 38,122 36,646 20,934 Collision 4,744 5,149 4,996 5,129 5,419 Comprehensive 2,691 2,680 2,568 2,856 2,347 Source: 2011 GISA Automobile Insurance Experience Exhibits Average cost per insured vehicle by type of coverage for private passenger vehicles, 2007 to 2011 Type of coverage Third-party liability Accident benefits Collision Comprehensive Source: 2011 GISA Automobile Insurance Experience Exhibits FACTS

46 Section two: canada s p&c insurance industry by line auto insurance Major issues safety The number of motor vehicle collision deaths and injuries continues to decline in Canada as a result of improved driver behaviour, vehicle design and, to some extent, better road networks. In 1990, 3,445 people died in traffic accidents, while in 2009 (the most recent year for which statistics are available), 2,011 died. This is a reduction of 42%. The decline in the rate of injuries has been less significant. In 1990, 262,680 Canadians were injured in collisions; this was reduced to 172,883 by 2009, which is a reduction of 34%. Many of today s most effective road safety measures are the result, in part, of insurer advocacy. Insurers were leaders in the push for the universal use of seatbelts. Insurers have also advocated for stronger penalties for drinking and driving and better law enforcement, which have made a significant impact on driver behaviours. The industry played a big role in the introduction of graduated driver licensing in all provinces, which also improved safety. As new road safety concerns emerge, such as driver distraction and the increasing number of aging drivers, insurers are helping to identify the factors that lead to increased risk and are working to implement measures that will help keep Canadians safe. Reducing driver distraction is the latest focus of advocacy to improve driver behaviour. IC has been a strong advocate for education about the dangers of distracted driving. All provinces in Canada, plus the Yukon, now have bans in place on using hand-held electronic devices, including cellphones, while driving.! In ,445 Canadians died in traffic accidents In ,011 Canadians died in traffic accidents A 42 % reduction Improved vehicle design including airbags, energyabsorbing car frames and anti-lock braking systems has also contributed to the reduction in deaths and injuries from collisions. Of course, some vehicles are safer than others. The Canadian Loss Experience Automobile Rating (CLEAR) system identifies the average size and frequency of insurance claims for most makes and models of cars. Most insurance companies use CLEAR to rate vehicles based on their safety record and the cost to repair or replace them, and then offer lower premiums to drivers who buy cars with better ratings. While vehicles improve, the Canadian road network is not always keeping pace. Much of it is used beyond capacity, particularly in large urban centres. Increased volume of traffic increases collision risk. However, road design and maintenance improvements, including better lighting, more shock-absorbent roadside barriers and speedier snow removal and de-icing programs, can reduce risk FACTS 45

47 Section two: canada s p&c insurance industry by line auto insurance Major issues Crime Auto insurance crime costs the Canadian P&C insurance industry hundreds of millions of dollars each year. Auto insurance crime can be perpetrated by a single policyholder making a false or exaggerated claim or a large organized crime ring that steals vehicles, operates chop shops and stages collisions to support accident benefits claims. Insurance fraud and vehicle theft are attractive activities for organized crime rings because they are highly profitable and yet are low risk compared to other forms of crime. These cases are complex and difficult to prosecute because they cross many boundaries jurisdictional, political, geographic and administrative. The P&C insurance industry, led by IC, works on several fronts to prevent, detect and investigate auto insurance fraud and vehicle theft and to recover stolen vehicles. These efforts include raising consumer awareness and partnering with insurers, law enforcement and government agencies. Auto theft accounts for a large percentage of all property crime in Canada. Organized rings are carrying out a growing number of auto thefts, including thefts of Canadian autos bound for international export. To assist police in finding stolen autos, IC partners with police services in Alberta, Ontario and Quebec, using licence plate reader technology to scan the plates of cars on streets and in parking lots and to compare their numbers to a national list of stolen autos. When a match is found, police are alerted. IC has also partnered with national and international law enforcement and customs agencies to recover autos stolen in Canada and bound for export. In 2011, IC helped recover 367 high-end stolen autos, worth $8.8 million, before they could be shipped offshore. On the prevention side of this issue, IC publishes a list every year of the most frequently stolen car models to alert consumers of the risks. The 10 most frequently stolen autos in Canada, Honda Civic SiR 2-door Honda Civic SiR 2-door Chevrolet Trailblazer SS 4-door 4WD Ford F350 SD 4WD pickup Cadillac Escalade 4-door AWD Ford F350 SD 4WD pickup Cadillac Escalade 4-door 4WD Ford F350 SD 4WD pickup Ford F350 SD 4WD pickup Acura Integra 2-door Auto insurance fraud also includes staged collisions in which participants make false claims for injuries and for vehicle damage in collusion with health and rehabilitation facilities and auto repair shops. In 2011, IC s Investigative Services department took part in major joint investigations with police into stagedcollision rings. The criminal activities uncovered by Project 92 in Scarborough, Ontario, are estimated to have cost the industry approximately $25 million and resulted in the convictions of 39 individuals, including a 3½-year federal prison sentence for the ringleader. The value of stolen autos recovered by IC in 2011 jumps to $17 million when autos that were repatriated from overseas and those recovered using licence plate reader technology are included FACTS