June 2008 Archives

An actuarial report estimates bodily injury claims costs are expected to increase 29% -- implying an estimated 10.8% increase in the basic auto insurance premium -- following a decision in which the Alberta Court of Queen's Bench eliminated the province's Cdn$4,000 cap on payments for damages related to minor auto injuries.
The estimate is contained in a report submitted by the actuarial consulting firm Oliver Wyman Ltd. to the Alberta Automobile Insurance Rate Board.
The board will consider the report in deciding on the annual industry-wide rate level adjustment to become effective on Nov. 1, 2008.
Oliver Wyman's predictions were based in part on the findings contained in a 2004 KPMG report to the Alberta finance department. In it, KPMG found that out of the total 30.2% savings in bodily injury claims presented in the report, 21.3% -- or 70.5% of the total -- was due to the cap on minor injuries and the balance, 8.9%, was for non-cap-related auto insurance reforms.
"We assume this same relative split of costs, 70.5% versus 29.5%, is applicable today," Oliver Wyman notes. "As we estimate the minor injury cap to have resulted in a savings in bodily injury claim costs of 21.6%, we estimate that the repeal of the cap will result in an increase in bodily injury claim costs of 27.6% (1 divided by .784)."