The largest single component in determining premium rates is claims costs. Claim costs include the payments to the insured, the cost of defending the insured against third party claims, payment of third party claims and the administrative costs of handling all claims.
There is variation in claim costs between jurisdictions for automobile insurance due to differing coverage and benefits available between jurisdictions and other items that can impact the number of accidents such as traffic density, weather, and physical road infrastructure.
The graphs below show three widely used insurance measures: average earned premiums per vehicle, average claim costs per earned vehicle and the earned incurred loss (claims) ratio for five accident years as at December 31, 2015 for Private Passenger Automobiles excluding Farmers for Alberta, Ontario, Atlantic Provinces, the Territories and Countrywide. The loss ratio is calculated as the incurred claim costs divided by earned premiums.
The data for the graphs are subtracted from the GISA Actual Loss Ratio Exhibits (AUTO 1010) - 2015.