Craig A. Allen, FCIA, FCAS, March 12, 2020

The above blog
post “Honesty in Insurance – the Facts that Drivers Deserve,” posted in
February 2020 on the blog “Alberta Auto Insurance Facts,”[1] makes the claim that the loss cost statistics cited in FAIR Alberta’s press
release of February 13, 2020 cannot be found in the government’s report of
January 31, 2020, prepared by Oliver Wyman.[2] It further draws the inference that insurance claims costs are on the rise.
However, as reported by FAIR Alberta, **this has not been a fact for the
last 36 months**.

To assist the reader of the blog, Tables A1 through G2 below demonstrate the validity of the statistics in the FAIR Alberta press release. These tables identify and cite the facts that FAIR Alberta has found in the government report, and lead the reader to the conclusions reported on February 13.

The calculated results provided by FAIR Alberta provide a better measure of the most recent loss costs than do the summary tables on pp. 11-13 of the government report. The government’s summary tables fail to show the point in time (mid-2016) where loss costs began to stabilize. Instead, they average the loss costs across the entirety of 2016. Further, the last data point reported by the tables is for the first half of 2019. This data point does not capture claims activity in summer and autumn months. Comparing this data point to the prior ones is making an inconsistent “apples-to-oranges” comparison. A valid comparison of accident year results can only be made by delving further into the report, into the more detailed tables shown in Appendix B. That is what FAIR Alberta has done.

Further, the calculated results provided by FAIR Alberta are inflation-adjusted to a consistent 2016 level, using the Consumer Price Index for Alberta as published by Statistics Canada. The inflation-adjusted costs reflect the real costs of claims on Albertans’ purchasing power.

“Alberta Auto Insurance Facts” states that the government report shows nominal bodily injury loss costs per vehicle increasing 20% between 2015 and 2018, and an annual 7.1% increase following 2011. FAIR Alberta does not disagree that bodily injury claims costs have increased since 2011 and since 2015.

**However,
“Alberta Auto Insurance Facts” leaves out the fact that real bodily injury loss
costs stopped increasing in mid-2016, and have remained roughly constant for
the last three years.**

“Alberta Auto Insurance Facts” cites the government report’s projection that bodily injury claims costs will increase by 7% in the next year. However, also stated in the government report is that there is evidence of moderation in the previously steep increases in loss costs. As the government report states, the selection of the future loss trend rate is challenging, in light of the uncertainties seen in recent accident years. That said, a 7% increase in the next year would be a sharp change from the near-stability, in inflation-adjusted terms, reported in the last 36 months.

[1] http://www.albertaautoinsurancefacts.ca/fact-check/

[2] “Semi-Annual Review of Industry Experience – Preliminary Report as of June 30, 2019, Private Passenger Vehicles,” Oliver Wyman for the Alberta Automobile Insurance Rating Board, January 31, 2020

## Bodily Injury Loss Cost

### Table A1: Bodily Injury 6-Month Statistics, from Government Report

### Table A2: Bodily Injury 12-Month Statistics

#### Sources:

- Column [1] from Appendix B, Page 1, Column (1), Oliver Wyman, Jan. 31, 2020
- Column [2] from Appendix B, Page 1, Column (3), Oliver Wyman, Jan. 31, 2020
- Column [3] from Appendix B, Page 1, Column (7), Oliver Wyman, Jan. 31, 2020
- Column [5] from Table A1, Column [2],

= Sum of 2016.2 and 2017.1 for 2016-2017, Sum of 2017.2 and 2018.1 for 2017-2018, Sum of 2018.2 and 2019.1 for 2018-2019 - Column [6] from Table A1, Column [3],

= Sum of 2016.2 and 2017.1 for 2016-2017, Sum of 2017.2 and 2018.1 for 2017-2018, Sum of 2018.2 and 2019.1 for 2018-2019 - Column [7] = Column [6] / Column [5]
- Column [8] from Consumer Price Index for Alberta, All-items, Annual Average for 2016, Statistics Canada
- Column [9] from Consumer Price Index for Alberta, All-items, Statistics Canada;
- Dec. 2016 for 2016-2017, Dec. 2017 for 2017-2018, Dec. 2018 for 2018-2019
- Column [10] = Column [7] * Column [8] / Column [9]
- Column [10], Pct Change, 3 Yrs = {[10] for 2018-2019 / [10] for 2016-2017} – 1

## Accident Benefits Loss Cost

### Table B1: Accident Benefits 6-Month Statistics, from Government Report

### Table B2: Accident Benefits 12-Month Statistics

#### Sources:

- Column [1] from Appendix B, Page 3, Column (1), Oliver Wyman, Jan. 31, 2020
- Column [2] from Appendix B, Page 3, Column (3), Oliver Wyman, Jan. 31, 2020
- Column [3] from Appendix B, Page 3, Column (7), Oliver Wyman, Jan. 31, 2020
- Column [5] from Table B1, Column [2],

= Sum of 2016.2 and 2017.1 for 2016-2017, Sum of 2017.2 and 2018.1 for 2017-2018, Sum of 2018.2 and 2019.1 for 2018-2019 - Column [6] from Table B1, Column [3],

= Sum of 2016.2 and 2017.1 for 2016-2017, Sum of 2017.2 and 2018.1 for 2017-2018, Sum of 2018.2 and 2019.1 for 2018-2019 - Column [7] = Column [6] / Column [5]
- Column [8] from Consumer Price Index for Alberta, All-items, Annual Average for 2016, Statistics Canada
- Column [9] from Consumer Price Index for Alberta, All-items, Statistics Canada;
- Dec. 2016 for 2016-2017, Dec. 2017 for 2017-2018, Dec. 2018 for 2018-2019
- Column [10] = Column [7] * Column [8] / Column [9]
- Column [10], Pct Change, 3 Yrs = {[10] for 2018-2019 / [10] for 2016-2017} – 1

## Property Damage Loss Cost

### Table C1: Property Damage 6-Month Statistics, from Government Report

### Table C2: Property Damage 12-Month Statistics

#### Sources:

- Column [1] from Appendix B, Page 2, Column (1), Oliver Wyman, Jan. 31, 2020
- Column [2] from Appendix B, Page 2, Column (3), Oliver Wyman, Jan. 31, 2020
- Column [3] from Appendix B, Page 2, Column (7), Oliver Wyman, Jan. 31, 2020
- Column [5] from Table C1, Column [2],

= Sum of 2016.2 and 2017.1 for 2016-2017, Sum of 2017.2 and 2018.1 for 2017-2018, Sum of 2018.2 and 2019.1 for 2018-2019 - Column [6] from Table C1, Column [3],

= Sum of 2016.2 and 2017.1 for 2016-2017, Sum of 2017.2 and 2018.1 for 2017-2018, Sum of 2018.2 and 2019.1 for 2018-2019 - Column [7] = Column [6] / Column [5]
- Column [8] from Consumer Price Index for Alberta, All-items, Annual Average for 2016, Statistics Canada
- Column [9] from Consumer Price Index for Alberta, All-items, Statistics Canada;
- Dec. 2016 for 2016-2017, Dec. 2017 for 2017-2018, Dec. 2018 for 2018-2019
- Column [10] = Column [7] * Column [8] / Column [9]
- Column [10], Pct Change, 3 Yrs = {[10] for 2018-2019 / [10] for 2016-2017} – 1

## Collision Loss Cost

### Table D1: Collision 6-Month Statistics, from Government Report

### Table D2: Collision 12-Month Statistics

#### Sources:

- Column [1] from Appendix B, Page 4, Column (1), Oliver Wyman, Jan. 31, 2020
- Column [2] from Appendix B, Page 4, Column (3), Oliver Wyman, Jan. 31, 2020
- Column [3] from Appendix B, Page 4, Column (7), Oliver Wyman, Jan. 31, 2020
- Column [5] from Table D1, Column [2],

= Sum of 2016.2 and 2017.1 for 2016-2017, Sum of 2017.2 and 2018.1 for 2017-2018, Sum of 2018.2 and 2019.1 for 2018-2019 - Column [6] from Table D1, Column [3],

= Sum of 2016.2 and 2017.1 for 2016-2017, Sum of 2017.2 and 2018.1 for 2017-2018, Sum of 2018.2 and 2019.1 for 2018-2019 - Column [7] = Column [6] / Column [5]
- Column [9] from Consumer Price Index for Alberta, All-items, Statistics Canada;
- Dec. 2016 for 2016-2017, Dec. 2017 for 2017-2018, Dec. 2018 for 2018-2019
- Column [10] = Column [7] * Column [8] / Column [9]
- Column [10], Pct Change, 3 Yrs = {[10] for 2018-2019 / [10] for 2016-2017} – 1

## Comprehensive Loss Cost

### Table E1: Comprehensive 6-Month Statistics, from Government Report

### Table E2: Comprehensive 12-Month Statistics

#### Sources:

- Column [1] from Appendix B, Page 5, Column (1), Oliver Wyman, Jan. 31, 2020
- Column [2] from Appendix B, Page 5, Column (3), Oliver Wyman, Jan. 31, 2020
- Column [3] from Appendix B, Page 5, Column (7), Oliver Wyman, Jan. 31, 2020
- Column [5] from Table E1, Column [2],

= Sum of 2016.2 and 2017.1 for 2016-2017, Sum of 2017.2 and 2018.1 for 2017-2018, Sum of 2018.2 and 2019.1 for 2018-2019 - Column [6] from Table E1, Column [3],

= Sum of 2016.2 and 2017.1 for 2016-2017, Sum of 2017.2 and 2018.1 for 2017-2018, Sum of 2018.2 and 2019.1 for 2018-2019 - Column [7] = Column [6] / Column [5]
- Column [9] from Consumer Price Index for Alberta, All-items, Statistics Canada;
- Dec. 2016 for 2016-2017, Dec. 2017 for 2017-2018, Dec. 2018 for 2018-2019
- Column [10] = Column [7] * Column [8] / Column [9]
- Column [10], Pct Change, 3 Yrs = {[10] for 2018-2019 / [10] for 2016-2017} – 1

## Basic Coverage Loss Cost

### Table F2: Basic Coverage 12-Month Statistics

#### Sources:

- Column [5] = Table A2 Column [5] + Table B2 Column [5] + Table C2 Column [5]
- Column [6] = Table A2 Column [6] + Table B2 Column [6] + Table C2 Column [6]
- Column [7] = Column [6] / Column [5]
- Column [9] from Consumer Price Index for Alberta, All-items, Statistics Canada;
- Dec. 2016 for 2016-2017, Dec. 2017 for 2017-2018, Dec. 2018 for 2018-2019
- Column [10] = Column [7] * Column [8] / Column [9]
- Column [10], Pct Change, 3 Yrs = {[10] for 2018-2019 / [10] for 2016-2017} – 1

**ALL COVERAGE LOSS COST**

### Table G2: All Coverage 12-Month Statistics

#### Sources:

- Column [5] = Table D2 Column [5] + Table E2 Column [5] + Table F2 Column [5]
- Column [6] = Table D2 Column [6] + Table E2 Column [6] + Table F2 Column [6]
- Column [7] = Column [6] / Column [5]
- Column [9] from Consumer Price Index for Alberta, All-items, Statistics Canada;
- Dec. 2016 for 2016-2017, Dec. 2017 for 2017-2018, Dec. 2018 for 2018-2019
- Column [10] = Column [7] * Column [8] / Column [9]
- Column [10], Pct Change, 3 Yrs = {[10] for 2018-2019 / [10] for 2016-2017} – 1