Costs rising as severe collisions rise

Published: October 11, 2017

Updated: July 24, 2018

Author: Luke Jones

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The auto insurance market in Canada is being stretched by the increasing severity of collisions and no reduction in accidents overall. A speaker at the National Insurance Conference of Canada (NICC) last week said the situation is causing “big cost pressures upward on severity coming from both injuries and the repairs of cars themselves.”

“We see a lot of upward gusts of pressure coming from third-party liability claims and injuries in general in most provinces,” said Patrick Barbeau, senior vice president of claims with Intact Financial Corporation. “Frequency overall is not going down and severity is going up at a much faster pace than the average inflation.”

He suggests that technology is a cause for the worrying trend. “Replacing a bumper, mirror, wheels or even the windshield today often involves rewiring and reprogramming multitudes of sensors and cameras, increasing costs at a speed that has never been seen before,” he said during a session titled Canadian Auto – State of the Union on Oct. 3.

“From a claims perspective, the actual cost of repairing cars is also increasing very fast across the country. One would think all the safety features that have been developed in cars over the past few years would have impacted downward the frequency of car accidents, but that has not happened yet.”

Rising costs are largely being consumed by insurance companies and are not going to customers. Almost every jurisdiction is trying its own way of solving the problem, whether through caps or deductibles. Ontario operates a no-fault insurance market, while other provinces use public systems.

“It seems as if so much drain is on the system from so many different parties, yet there is one person that is paying for it and that is the consumer,” said Bob Tisdale, president and chief operating officer at Markham, Ont.-based Pembridge Insurance Company. “Everybody is trying a different approach and yet the consumer nowhere in the country would say, ‘I’m really well-served.’”