The number of people killed or injured in auto accidents in Ontario fell 25 per cent in a decade, but the government still guarantees insurers a “reasonable rate of return” of 12 per cent. That figure was last adjusted in 1996, when the long-term bond rate it was based on was 10 per cent.
“The long-term bond rate now is about two or three per cent and they’re still being allowed to earn 12 per cent,” McCarter told reporters. “We think that rate should be reviewed, but on the other hand, because of the very high claim costs in Ontario, they’re paying out a lot more claims.”
Finance Minister Dwight Duncan said the Ontario government would look at McCarter’s recommendation to lower the 12 per cent guaranteed rate of return for insurers, but made no promises to cut the rate.
All of this is in spite of the fact that recent amendments to the regultaions under the Insurance Act have drastically reduced accident benefits for innocent accident victims in Ontario. In other words, drivers in Ontario are paying higher premiums for less covereage while the government aims to ensure that the industry makes a return of 12%. The long term bond rate was 2.6% on avereage within the last few days of this post. Innocent accident victims suffering significant personal injury are restrcited in how they can invest their money under structured settlements. The present return for personal injury victims is around 3%. Something is not right.
