In August 2013 the Ontario government announced a two-year rate reduction strategy. What has ensued since that announcement has been a series of reforms to bring down the cost of insurance. Many of those reforms include no-fault accident benefit reductions.
So how successful has the strategy been? Last week FSCO posted the fourth quarter rate approvals for 2015. The FSCO post indicates that rates fell a minuscule 0.15% in the quarter. For the entire year, rates fell by just 1.0%. Since August 2013, rates have only come down by 7.1%. That's not even half of what the government has been trying to achieve.
Premier Kathleen Wynne now calls the 15% rate reduction strategy a "stretch goal". That's as close as you're going to get a government to admit to failure.
Another round of no-fault accident benefit cuts are to be introduced on June 1 of this year but don't expect them to bring down rates by a significant amount. The accident benefits portion of the Ontario in 2014 was only 33.5% of claim costs (see the chart below). That would mean for a further 8% reduction in premiums, accident benefit costs would have to go down by about 24%. Meanwhile, some of the accident benefit cuts will drift over to third party liability costs since not at-fault accident victims will be able to sue for benefits no longer available through no-fault.
It's time the government undertake a comprehensive review of the auto insurance system and resolve the systemic problems plaguing the system. Half measures lead to "stretch goals" and chronically high insurance premiums.
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