IBC offers recommendations on transforming NL auto insurance industry

Published: September 4, 2018

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The Board of Commissioners of Public Utilities (PUB) is continuing to discuss the review of the auto insurance market in Newfoundland and Labrador (NL). Hearings will continue in St. John’s as the PUB looks to solve issues in the current market, including rising claims costs.

Amanda Dean, Insurance Bureau of Canada (IBC) Vice-President, Atlantic has written a letter to the Member of the House of Assembly (MHAs) to detail what problems the NL auto insurance market faces and what possible solutions there are.

There is no doubt motorists in the province pay too much for the coverage, it is a situation that prompted the NL government to commission a review. Dean says insurance companies are hampered and are likely to see auto insurance in NL as a dead-end:

“Auto insurance claims are too high relative to the premiums that are taken in. Once insurers pay provincial and municipal taxes; broker fees or agent salaries; building costs; and other operational fees, auto insurance is a losing proposition.”

Dean suggests regulations are too stringent, referencing the process for insurance companies to seek government improvement when debuting a product. Furthermore, the solution must be regulated by the Board of Commissioners of Public Utilities in Newfoundland and Labrador (PUB).

“That is why IBC, on behalf of our members who are the insurers who write auto insurance policies in this province, continues to participate in the auto insurance reform process that is currently being carried out by the PUB. Drivers in this province need relief. Real change is needed in order to avoid increasing premiums.”

In her open letter, Dean details some of the changes IBC thinks can make a difference in NL:

Implement a minor injury damages cap: A cap amount of $5,000 with annual inflation adjustments, along with a definition of minor injury that reflects the prevailing medical literature. These are injuries that resolve within days, weeks, or months. Additionally, the amount of the cap is over and above lost wages and medical bills. Features of this recommendation have already been implemented elsewhere in Canada;

Enhance accident benefits: To bring NL in line with neighbouring provinces, we suggest making accident benefits mandatory, and increasing the benefit amounts to match the neighbouring Atlantic Provinces. We are also suggesting to establish pre-approved evidence-based treatment protocols for minor injuries which would see people begin treatment quickly;

Make it easier to repair and replace damaged vehicles: a direct compensation property damage (DCPD) model would mean that regardless of who is at fault, the customer’s insurer would repair their vehicle in a collision. However, for rating purposes, fault would still be assigned to the at-fault party; and

Change the rate regulation process so that it is quicker and less costly: This too will work toward making the product more affordable to offer for Newfoundland and Labrador drivers. In spite of the best efforts of those who regulate, the current system is incredibly costly. This translates into price shock for consumers and deters new entrants.