Newfoundland Introduces New Auto Package, Rate Freeze

A new package of reforms to Newfoundland’s auto insurance system is being touted as a means to achieve 15% rate reductions. Newfoundland & Labrador Premier Danny Williams, and Government Services Minister Dianne Whalen introduced the new package recently, which is based on an actuarial study conducted by the province’s Public Utilities Board (PUB).

Included in the package is an immediate freeze on rates for one year. Also, among the reforms is a $2,500 deductible on claims for pain and suffering and mandatory reductions in coverage for collision, comprehensive and uninsured motorists portions of policies.

The 15% average rate reduction is broken down as follows: 9% third-party liability; 27-37% collision; 19% comprehensive; 11% uninsured motorists coverage. The refunds expected from insurers will be effective the date the new legislation is proclaimed.

As well, compensation awards will be based on 100% of net wages instead of gross, and compensation received from other insurance plans, called “double-dipping”, will be eliminated.

Other provisions include:

Underwriting guidelines to eliminate coverage refusals based on age, gender, marital status, vehicle age or Facility Association status;

Changes to notification requirements for Facility Association policyholders;

The ability to exclude driving-age household members from policies;

Insurers being required to give six-months notice before withdrawing from the province;

Raising the minimum capital requirement for insurers to $5 million from the current $1 million;

Requirement for monthly payment plans to be offered by most insurers, including the Facility Association;

Harsher fines for uninsured drivers;

As well, companies must give six months notice before withdrawing from the province or pay a minimum fine of $100,000, up to maximum of $1 million.

An up-to-date study of closed claims will be conducted, and subsequently the PUB will conduct a series of public hearings on auto, as well as homeowners’, commercial and marine insurance. Those meetings could be followed by additional measures, including permitting group rating, stiffer impaired driving fines, banning underwriting based on age, gender and marital status, and mandatory accident benefits.

The year-long freeze on rates could be ended following the completion of the claims study and public hearings.

“The reforms we are announcing today are based on sound actuarial advice,” says Whalen. “We took the time to do this properly and thoroughly, and we now have a good, solid package for consumers which is a first step to be complemented by a longer-term, strategic reform plan.”