N.S.: cost implications of injury cap changes
Oliver Wyman was contracted by the Superintendent of Insurance for the Province of Nova Scotia to provide actuarial services in regards to possible changes to the Minor Injury Regulations (MIR) that became effective on November 1, 2003 under the "Automobile Insurance Tort Recovery Limitation Regulations."
The firm found the following:
• The enactment of the current minor injury cap ($2,500) and definition has reduced private passenger automobile Bodily Injury coverage claim costs by 21% (estimated).
• The proposed changes to the minor injury cap ($7,500) and definition (more restrictive) will increase the Bodily Injury coverage claim costs by 17%, or a $24 increase in our estimated required average premium for 2010. • The required average premium for claims that are expected to occur in 2010 under the current minor injury cap and definition is $699 (estimated). The required average premium increases by $24, to $723 (estimated), for the proposed changes to the minor injury cap and definition. The average street premium for this period is $800 (estimated).
• Approximately $69 million (estimate) in additional claim costs would be paid by insurers if all claims (open or closed) that had been subject to the current minor injury cap and definition were to be retroactively paid under the proposed minor injury cap and definition. Approximately $7 million (estimate) in additional claim costs would be paid by insurers if all open claims as of July 1, 2010 were to be settled based on the new minor injury cap and definition. The estimated additional costs ($69 million or $7 million) would be higher if it is the case that a significant number of those that have recently suffered automobile accident injuries are awaiting the results of the Government’s review of the MIR before proceeding with claims. Also, the estimated amounts do not reflect additional processing costs that may be incurred by insurers.
• On average, the after-tax return on equity earned by insurers for private passenger automobile insurance in Nova Scotia over the period 2004 to 2008 was approximately 26% (estimate); over the period 1999-2008 was approximately 17% (estimate); and over the period 1997-2008 was approximately 15% (estimate).
To see more of the Oliver Wyman report, see this PDF.
