Insurers respond to New Brunswick bill

Responding to the amendment bill announced this week by the New Brunswick government to the province’s Insurance Act – which primarily presents insurers with an August 15 ultimatum to file for lower auto insurance rates or face immediate across-the board reductions – insurers have objected to the “bureaucratic process” which has slowed the filing applications and also created confusion to when rate submissions should be put forward for approval. “The industry has been completely frustrated by the current regulations. Insurance companies have been more than willing to comply with the government’s rate reduction policy but, before this bill, we were essentially not even allowed to apply for lower rates because of the pending PUB [Public Utilities Board] hearing process,” says the Insurance Bureau of Canada’s (IBC) vice president of the Atlantic Region, Don Forgeron.The new legislation presented by the Conservative Party (CP) government allows for insurers’ rate reductions to be applied immediately without approval from the PUB – presumably to benefit auto policyholders through cheaper insurance as quickly as possible. Although, such rate reductions filed would still ultimately be subject to review by the PUB, with the implication that any reduced pricing would have to be at or below the 20% reduction outlined in the government’s ultimatum. Rate adjustments approved will also be frozen for a 12 month period to the beginning of July 2004 – regardless of loss experience.Prior to the province’s recent general election – through which auto insurance rate increases became the central political platform of debate between the major contesting parties, and in the end almost resulted in the CP losing its voter majority – the government had presented a plan for auto insurance reform that capped “pain and suffering” bodily injury awards from vehicle accidents at $2,500. Subsequently, several auto insurers operating in the province announced their intent to reduce rates based on the reform initiatives.However, the government’s plan outlined a hearing process to be conducted through the PUB for investigating and approving rate adjustments relative to the new auto insurance reforms. The hearing process begins on August 11 of this year – just three days short of the government’s latest rate reduction ultimatum. “To date, companies that insure almost half the motoring public in New Brunswick have filed for rate reductions with the province’s Public Utilities Board. Many others [insurers] have opted to wait for the conclusion of the hearings given that they were told their filings would not be approved if they in fact filed them with the Board,” observes Forgeron.Forgeron says insurers were more than willing to comply with the government’s call for auto insurance rate reductions in light of the cost reform measures introduced. “The government could have avoided all this [confusion] by establishing clear rules very early on in the process,” he adds. As a result, Forgeron notes that policyholders may have to wait for insurers to calculate and return retroactive funds in terms of the difference charged on old rates. The government’s new bill also dictates that reduced rates filed will be retroactive to the beginning of July this year, and that insurers have a 45-day window period in order to repay the difference to insureds or face tough penalties.