Expert says drivers in Newfoundland and Labrador are overpaying for auto insurance
Published: September 21, 2018
Newfoundland and Labrador is continuing its review into its broken auto insurance system as government and insurers work to find solutions. With plenty of opinions already in the ring, another expert has stepped forward with a method for improving the system.
Fred Lazar, an associate professor of economics working at York University in Toronto, has sent his report to the Public Utilities Board (PUB), which held its review hearings this month. Lazar’s report confirms that motorists in the province have been paying too much for auto premiums since 2011.
While drivers seem to be paying too much for auto insurance, the Insurance Bureau of Canada (IBC) has consistently offered a conundrum situation in NL. Drivers are paying too much, but insurance companies are not making money due to rising claims and repair costs. So much so, many insurance providers may even leave the market if reforms are not favourable.
This essentially means the Newfoundland and Labrador needs to find a system that both reduces premiums for customers but somehow reduce the costs of claims for insurers. It is a balancing act the is hard to define in reformed systems.
Lazar says between 2011 and 2016 drivers in NL overpaid for auto insurance by between $54 million and $92 million.
“Was there overpayment in every year (2011 to 2016) of premiums? The answer to that is unequivocally ‘yes,’ regardless of the actual performance of the insurance companies,” Lazar said during the public hearings last week.
“Now, how can I say this with certainty? Because the assumptions that were used in setting the premiums used a return on equity that was too high, used a return on investment that was too low, and did not look at best practices with regard to expenses.”