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Motor insurance recorded losses for a third consecutive year


Justine Montminy

24 August, 2018 07:00

Photo : PixaBay

In 2017, the motor insurers Quebec registered an increase in loss, an increase in the amount of claims and a drop in profits, says thefinancial markets Authority in its annual Report on the financial institutions 2017.

The regulator revealed that the losses of motor insurers in Quebec accounted for 7.7% of premiums earned for private passenger vehicles. These account for 81 % of total premiums written. For the whole of the car park of quebec, the loss of the insurers represents 6.5% of earned premiums, while it was 2.4 % in 2016. (Editor’s NOTE : see box below) to distinguish between earned premiums and written premiums.)

With respect to the total amount of the claims, it has increased by 9.7 % from 2016 to 2017. It totaled $ 2.2 billion (G $). It is also a seventh consecutive increase, reports the Authority. The annual profitability of automobile insurers gradually decreasing since 2011, ” adds the regulator.

The Authority also makes the point in his report on the average premium underwritten by the insurers automobile quebec in 2017 for passenger cars. It has been 564 $. This is an increase of 4.1 % compared to 2016.

The regulator expects that the average written premium is projected to rise again in 2018. The Authority has surveyed insurers to make this prediction. Thus, 24 insurers, which own 77 % of the premiums of the market of passenger cars, have meant that they had to increase their rates.

There are also 30 insurers, which own 18 % of the volume of automobile insurance in Québec, that have said they want to maintain their rates at current level. There is an insurer who has indicated a desire to lower them. The insurer owns 1% of the market.

Significant increase in the frequency of claims

Can also be found in the report of the Authority that the primary cause of automobile accidents in Quebec is distracted driving, which includes cell phone use while driving. The regulator states that the frequency of claims or the number of claims divided by the number of years-acquired vehicles (see definition in sidebar), has seen an increase of 4.5% in 2017, compared to 2016 for passenger cars. In comparison, the increase was 0.1 % for 2016 to 2017.

Steady increase for the past 10 years the cost of claims

As to the average cost per claim, the total cost of claims divided by the number of claims, it is increasing in a progressive way in the last ten years, stresses the Authority. Thus, since 2008, the costs of claims have increased, respectively, 42.8 % and 24.9 % for the guarantee “civil liability” and ” collision and upset “. They fell 0.6 % for the guarantee ” accident without collision or overturning “.

The Authority also calculates the average cost per claim. Again, the indicators are on the rise. The three guarantees, however, all experienced an increase in the cost of claims for 2017. The increase is 2.6 % for the guarantee ” civil liability “. For the ” collision and upset “, she is 4 %. It amounted to 5.7% for the ” accident without collision or overturning “.

The Authority says that the increase in the cost of claims is, among others, related to the new technologies driving assistance that is found increasingly in vehicles. These new technologies are increasing the value of the vehicle, but also the cost of repairs.

Earned premiums and written premiums : what is it ?

Premiums earned (or gained)

It is the pro-rated portion of the written premiums corresponding to the period of exposure covered by the risk to a given date. For example, the premium for a one-year contract subscribed on the 1st of July is acquired or earned to 50 % at December 31. Therefore, only 50 % of the initial premium is recognised as earned premium or earned, for the year that has just ended.

Premiums written

These are the premiums paid by the insured for the full duration of the purchased protection (with a maximum duration of 12 months) for policies issued in the course of a year.

Years-vehicles acquired

These vehicles actually operated in the course of a year, the number of which is calculated pro rata for the elapsed time to a given date according to the policy term. For example, a contract that covers a vehicle for a period of one year and subscribed on 1 July is recorded as a half-vehicle for the current year and a half vehicle for the following year.

Source : financial markets Authority

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