Where Does Your Insurance Premium Go?
The average insurance revenue dollar 2000-2004
Why premiums go up…
Insurance companies are regulated by provincial governments on what premium can be charged to consumers for auto insurance. Regulations require insurance to cover healthcare and medical expenses from injury claims, which rose by 14 per cent each year from 1990-2001. After 2000, falling investment interest rates failed to provide an annual return to cover costs and to prevent rising premium prices. In 2001, for every premium dollar collected, $1.10 was spent on claims, taxes and business operating costs. That same year, the return to insurance company investors was only 3% - significantly less than other Canadian businesses and lower than the interest on a Guaranteed Investment Certificate. A “hard market” in the industry, years of low to negative returns, brings higher premium prices for consumers.
…and down
Insurance industry results are cyclical - years of higher industry earnings and lower premium prices for consumers are typically followed by years of low earnings and higher priced premiums. The strong industry earnings in 2004 indicate the return of significant premium reductions for consumers. A financially strong industry attracts healthy competition and consumers have more options finding the price, services and products they need.
Insurance fraud - 2000 and beyond
While the number of serious automobile collisions is decreasing, the number of personal injury claims is increasing dramatically. Your premium rate collectively covers, by far, the largest cost to the insurance industry – personal injury costs from auto collisions, of which whiplash accounts for the majority of claims for expenses, income loss and healthcare costs.
(Source: Canadian Coalition Against Insurance Fraud, Insurance Bureau of Canada)
The results of an independently commissioned national research study conducted in 2000 indicate the cost of personal injury insurance fraud to be $500 million per year. According to the study, more than 26% of all personal injury claims contain some element of fraud.
A national public opinion poll was released in 2001 revealed that 92% of Canadians do not approve of submitting a false or exaggerated insurance claim. Results indicate that nearly one in four Canadians knows someone who has committed personal injury insurance fraud.
Please report insurance fraud, in confidence, through the Insurance Bureau of Canada:
Call toll-free 1-877-IBC-TIPS or submit a tip online at http://www.ibc.ca/tips.asp