[PDF] 2021 AUTOMOBILE EXHIBIT INTRODUCTION AND ACTUAL LOSS

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AUTOMOBILE INSURANCE EXPERIENCE

INTRODUCTION

ALBERTA

2022

RÉSULTATS TECHNIQUES EN ASSURANCE AUTOMOBILE

PRODUCT // PRODUIT

AUTO1003-AB

TABLE OF CONTENTS

List of Exhibits ...................................................................................................................................................... 3

Data Missing at Close-Off .................................................................................................................................... 4

Notes to Users - General ................................................................................................................................... 5

Notes to Users - Legislative Reforms ................................................................................................................. 7

Data Adjustments .............................................................................................................................................. 11

Factors

Loss Development Factors

Private Passenger Automobile excluding Farmers .................................................................... 12

Commercial Automobile ............................................................................................................. 14

Unallocated Loss Adjustment Expense Factors ....................................................................................... 16

Alberta Health Services Levy .................................................................................................................... 17

Experience Exhibited

Coverages ................................................................................................................................................. 18

Column Headings ...................................................................................................................................... 19

Background ........................................................................................................................................................ 21

Exhibit Content Definitions and CSV File Record Layout ................................................................................. 23

Version Française .............................................................................................................................................. 24

LIST OF EXHIBITS

3 For 2022 Year-end data, GISA has mandated the publication of the following seven standard exhibits.

1. Loss Development

2. Actual Loss Ratio

3. Territorial including Third Party Liability Large Losses

4. Classification including Third Party Liability Large Losses

5. Size of Loss Distribution

6. Grid Level Exhibit

7. Catastrophe Report

Further information on these exhibits may be obtained from the GISA Catalogue of Statistical Exhibits found on

the GISA website at www.gisa.ca

DATA MISSING AT CLOSE-OFF

4

A close-off date of February 17, 2023 was enforced for the 2022 exhibit data. At this time there was still some

uncorrected data and the approximate (unfactored) totals for Alberta for 2022 submissions are as follows:

($000)

Written Premiums: 10,272

Paid Losses and Expenses: 77

Outstanding Losses and Expenses

as of December 31: 594

There is also a small amount of uncorrected data for prior years' submissions. This data has no significant

impact on the exhibits.

It should be noted that the missing data impacts the Actual Loss Ratio Exhibits and in part impacts other

exhibits.

NOTES TO USERS - GENERAL

5

1. Data verification, consistency and reasonability checks have been performed which led to some data

exclusions in specific classes of business to improve the integrity of the exhibits (see the Data

Adjustments section for details).

2. The exhibit is published on an Accident Year basis, which is defined as losses arising from incidents

occurring within the calendar period January to December for each of the stated years.

3. Development factors have been applied to the number of claims and claim amounts to project them

to the estimated ultimate level. For the purpose of producing the factored exhibits, except as

otherwise stated, the incurred loss development and incurred claim development factors were

based on the "Incurred Loss Development Factor Report on Incurred Count and Amount Factors for Application in December 31, 2022 Exhibits to All-Industry Alberta Automobile Insurance" for Private Passenger excluding Farmers and Commercial Automobile including Fleets Classes of Business as of the Valuation Date December 31, 2022 prepared by GISA's consultation actuary (Ernst & Young LLP). A summary of the selected factors is provided in the following pages. The underlying data used to derive these factors was the raw incurred amount and count

development triangles by accident half-year at half yearly intervals for each of the classes of

business by Coverage and Kind of Loss for accident half-year periods 2003-1 to 2022-2 inclusive, obtained from the Loss Development Exhibit for the province of Alberta.

The following table outlines the application of Loss Development factors to all categories of vehicles:

Vehicle Category Development Factors

a. Private Passenger (excl. Farmers) Private Passenger b. Commercial Automobile Commercial c. Farmers Private Passenger, Snow Vehicles

Antiques and Motorhomes Private Passenger

d. All other types of vehicles Commercial Development factors for categories a. and b. above are derived from the underlying data for the

category. These factors are applied to all other types of vehicles (i.e., categories c. and d.) because of

the limited volume of the data underlying these other vehicle types and therefore the volatility of loss

development factors derived from their experience.

4. The Actual Loss Ratio, Territorial and Classification Exhibits display the historical general level statistics

on a factored basis. The adjustments made to the loss experience consist of factors for Loss

Development, Unallocated Loss Adjustment Expenses (ULAE) and the Alberta Health Levy. The ULAE and Health Levy factors are provided in the following pages. The claims amounts exhibited do not contain any adjustments to reflect other expenses incurred by insurance companies, such as commissions, premium taxes (if any) and general operating expenses. Trend factors have not been applied to the claims experience to project it to a common level in time.

NOTES TO USERS - GENERAL

6

5. Note that Disability Income loss reserve amounts under Accident Benefits coverage may commonly be

reported on an already discounted basis and that some Bodily Injury and Disability Income losses may ultimately be settled by means of a structured settlement, at which point reserves will usually be reported on a discounted basis.

All ratios derived from the claim (loss) amounts (i.e. claim (loss) ratios, claim (loss) costs per car

insured, average costs per claim) are similarly on an as-reported and factored basis, unadjusted for the

time value of money.

6. Readers of this report should consider the 2020 and 2021 actual loss ratios anomalies due to

COVID-19 and expect the steep declines in the loss ratios to reverse once traffic levels and loss amounts return to more typical levels seen prior to the pandemic. Temporary pandemic related premium reductions provided by insurers are also expected to reverse as forecast claims costs move toward pre-pandemic conditions. On March 11, 2020 the World Health Organization declared COVID-19 a pandemic. In response, the Alberta and Federal Governments instituted various Emergency Orders to control the spread of COVID-19. Government orders and personal decisions to minimize exposure to COVID-19 resulted in a reduction in traffic levels in 2020 and 2021. The reduction varied by month and location across the province. The reduction in the reported claim counts and incurred claim amounts in 2020 and 2021 is largely attributed to the pandemic induced reduction in traffic levels. In response to policyholders' reduction in car usage and general economic uncertainty, insurers responded by offering rebates, rate reductions, and making changes to capping levels, amongst others. In addition, policyholders initiated reductions in their coverage. The actions taken by insurers and policyholders were generally temporary in nature due to the uncertainty of the pandemic's duration and seǀerity. These actions had a moderating effect on the overall rate of premium increases. Premium setting is prospective in nature which includes a rate filing approval process that begins months before the new premium level is effective. For example the 2021 earned premium is an average of the written premium in 2020 and 2021.

7. Effective January 1, 2022, the ASP has been changed for Alberta to capture new Coverage codes to

reflect the split of Third Party Liability (TPL) coverage between Bodily Injury (BI), Property Damage

Liability (PD) and Direct Compensation Property Damage (DCPD). The data reported under the new coverage codes is included in the CSV.

NOTES TO USERS - LEGISLATIVE REFORMS

7

1. Current Legislation

On October 30, 2020 the Goǀernment announced reforms to the proǀince's automobile insurance framework. Bill 41 amended the Insurance Act and included changes related to

prejudgment interest, minor injury regulation, diagnostic and treatment protocols regulation,

automobile accident insurance benefits regulation, and the property damage coverage. Bill 41

received royal assent on December 9, 2020. The amendments as noted below, have different effective dates applicable to claims occurring on or after the specified date. The introduction of direct compensation property damage (DCPD) is for policies effective on or after January 1, 2022. Insurance Act - Prejudgment Interest (Effective upon Royal Assent, December 9, 2020) - Prejudgment Interest paid on non-pecuniary damages will now fluctuate with current interest rates, as it already does with pecuniary damages. Insurance Act - The number of expert witnesses that can be called in an action involving loss or damage from bodily injury or death arising from the use of an automobile has been limited to: - one expert, if the claim value is less than $100,000; and - three experts if the claim value is $100,000 or more. Each expert may also tender no more than one report. Exceptions to these limits are permitted in the event of joint experts, consent of the other party, or discretion of the court to allow further experts if certain conditions are met. The Court also retains the jurisdiction to appoint its own experts. These rules apply to actions started on or after January 1, 2021. Minor Injury Regulation (Effective for accidents occurring on or after November 1, 2020) - details of the amendment are provided below under Minor Injury Regulation. Diagnostic and Treatment Protocols Regulation (Effective October 29, 2020) - The DTPR was amended as follows: o Dentists, psychologists and occupational therapists are now considered adjunct therapists and o the new benefit for treatment by any combination of these adjunct therapists is $1,000. Automobile Accident Insurance Benefits Regulation (Effective October 29, 2020, applicable to both new and existing claims). The AAIBR was amended as follows: o Clarification was included that Section B - Accident Benefits can be used for any medically necessary equipment, vehicle modifications and home modifications; and o Benefit amounts were increased: o - chiropractic services from $750 to $1,000; ƒ massage therapy and acupuncture from $250 to $350;

ƒ funeral expenses from $5,000 to $6,150;

ƒ grief counselling from $400 to $500;

ƒ employed disability income benefits from $400 to $600 per week; ƒ non-earner disability income benefits from the current Ψ135 for 26 weeks, to $200 for 104 weeks; and ƒ psychological, physical therapy, and occupational therapy services from $600 to $750. Introduce Direct Compensation Property Damage (Effective January 1, 2022) - Insurers are required to provide DCPD premiums separated from third party liability premiums.

NOTES TO USERS - LEGISLATIVE REFORMS

8

2. History of Reforms

fleet and non-garage policies renewed on or after 30/10/2003 to those derived from rates in effect at the prior renewal, unless the insured had been convicted of certain offences or had an at-fault claim. In this latter case, and for additional vehicles and other amendments and for new business issued on or after 30/10/2003, rates were frozen at levels in force on 30/10/2003, until 29/04/2005. As part of this process, the Government mandated insurers provide rebates to insureds for any excess premiums on any renewal policies effective on or after 30/10/2003. Under the Automobile Statistical Plan, insurers were required to file these premium rebates by means of two premium transactions, one offsetting the old premium amounts for the unexpired term of the policy, and the other on-setting the new premium amounts for the unexpired term

of the policy. Written (both debit and credit) premium transactions are assigned for both

exposure and premium amount to calendar/accident period based on the transaction effective date. For these rebates, the transaction effective date would be the same as the policy effective date, and would be on or after 30/10/2003. The rebate depressed average written premiums in the

In October 2004, the Minister of Finance and the Government of Alberta, through legislation

(Insurance Act), established the Alberta Automobile Insurance Rate Board (AIRB) as an independent, quasi-judicial regulator. The AIRB held formal public meetings to review premium rates for basic coverage for private passenger vehicles. Decisions regarding premiums were announced by August 1, and if there was an adjustment to rates, they would take effect on Noǀember 1. If the AIRB's decision was to decrease premiums, all automobile insurers within Alberta were required to do so. If the AIRB decided that an increase in premiums was warranted, insurers had the option to implement the increase. Because of the Alberta product reforms effective 01/10/2004 and 24/01/2004, and especially because of the recent past uncertainty as to the ultimate status of the Minor Injury Regulation, the incurred claim count and amount factors, and the derived ultimate claim counts and amounts, for the 2004 and subsequent years are subject to an even larger degree of uncertainty than usual, for certain long tailed coverages. It should be expected that these reforms may result in a shock change to level of ultimate claim frequency and/or severity for 2004-2 (and possibly 2004-1) and subsequent accident half years for the Third Party Liability - Bodily Injury, Underinsured Motorist, Accident Benefits - Medical/Rehabilitation and Accident Benefits - Uninsured Motorist sub-coverages, and that development patterns for these sub-coverages might also change.

NOTES TO USERS - LEGISLATIVE REFORMS

9 The ultimate claim frequency and/or severity for these sub-coverages for recent prior accident half years still having open claims as of the product reform implementation date may also be affected, but to a lesser degree. The Accident Benefits - Disability Income sub-coverage might possibly experience similar effects as a sort of ripple effect from the other changes. On July 1, 2014, changes to the Insurance Act allowed for stronger oversight of automobile insurance premiums, by providing the AIRB with the responsibility to regulate the entire (both basic and additional) automobile insurance premium. The annual industry-wide process administered by the AIRB since 2004 is eliminated and any rate changes occur on a company-by- company basis through filings with the AIRB.

3. Minor Injury Regulation

The reforms in 2004 introduced the Minor Injury Regulation (MIR). The MIR was challenged in the courts. On February 8, 2008, the Court of Yueen's Bench released its decision in the recent Charter Challenge cases, striking down as unconstitutional the MIR with its $4,000 (indexed) cap on non- pecuniary damages for claimants with minor injuries. In September 2008, an appeal of this decision was heard by the Alberta Court of Appeal and the court released its decision on June 12, 2009, overturning the decision of the lower court. On December 17, 2009, the Supreme Court of Canada dismissed the application for leave to appeal the decision of the Court of Appeal with costs, and so the Charter Challenge ended. o In the raw underlying unfactored data, incurred claim amounts consist of cumulative paid amounts up to 31/12/2010 and unpaid case reserve amounts as of 31/12/2010 reported under the Automobile Statistical Plan for Third Party Liability - Bodily Injury sub-coverage, indicated some insurers may have revised their 31/12/2009 case reserves to eliminate any additional amounts held as case reserves on account of the Charter Challenge, but giǀen the short time between the Supreme Court's dismissal of leaǀe to appeal, and the 31/12/2009 date of those case reserves, it is possible that not all relevant insurers had done so at that time. However, other sources of information indicate that many insurers were holding reserves for additional amounts on account of the Charter Challenge only as bulk reserves, not included in reporting under the Automobile Statistical Plan. It may therefore be reasonable to infer that the case reserves as at 31/12/2009 for this sub-coverage may have been be at levels on average modestly higher than those which would be expected had the Charter Challenge never occurred, but closer to them than may have been the case in the recent past. The projected ultimate claim counts and claim amounts for this sub-coverage, after factoring for expected development, are expected to be close to values reflective of the current situation now that the MIR has been finally determined to be constitutional.

On May 17, 2018 the Government amended the Minor Injury Regulations to clarify that some

temporomandibular joint injuries, as well as physical or psychological conditions or symptoms

arising from sprains, strains and whiplash injuries and that resolve with those injuries, are

considered minor injuries under the Minor Injury Regulation and should be treated as such.

NOTES TO USERS - LEGISLATIVE REFORMS

10 Effective for accidents occurring on or after November 1, 2020, the MIR was amended as follows: sprains, strains or whiplash-associated disorder injuries, whether physical or psychological in nature, that do not result in a serious impairment; andquotesdbs_dbs27.pdfusesText_33

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