Public Auto Plan for N.B. to Cost $80 Million-Plus

With the release of a committee report on the potential for public auto insurance in New Brunswick, cost of establishing the system has been pegged at $82 million. The report, presented by NDP MLA Elizabeth Weir, the committee’s chair, is the result of seven months of hearings to come up with a possible public auto system in the province.

In its final report, the committee notes that such a system would cost $82 million, and about 1,200 jobs in the province, although this figure includes the loss of just auto-related jobs and does not take into account insurers potentially withdrawing from the province altogether. As well, the provincial government stands to lose almost $4 million in corporate and premium taxes, along with an estimated $700,000 in federal taxes.

The system includes the building of five regional claims centers and a head-office to be based in Moncton, N.B. to serve about a half-million vehicles in the province. The expected average premium savings are just over $200 per policy, based on a basic auto policy. While the proposed Crown corporation will offer optional coverage for both collision and comprehensive coverage, as well as extended liability and accident benefits, private insurers are expected to compete on these products.

The biggest change to Weir’s proposed “socialist-style” system is that there will be no option to sue. Also, there will be no compensation for pain and suffering. The Dominion of Canada General Insurance Co.’s CEO George Cooke points out that the supposed “cost savings” of the Weir plan are based on financial figures available a year ago – the average auto premium in the province is now $1,020, he says, making average per policy savings just $27 under the Weir plan. “Prices [auto premiums] are [now] lower, markets are returning, the Facility Association [numbers] are reducing,” he adds. “N.B. should stand as an example representing what can be accomplished when the private sector and government work hard to protect the consumer.”

The “hidden cost” of a public system, Cooke says, will be turning away private investment in the province, and the subsequent tax support it brings. “If the recommendations of the [Weir] committee are accepted by the government, a strong message will be heard in the private capital markets: You may not be welcome in N.B. any longer. And be wary, any investment might be confiscated”.

“Essentially, the Select Committee [on Public Automobile Insurance] found that there may be benefits to offer a different product than the one currently mandated by the government,”notes Dennis Furlong, president of ING’s Atlantic division. “However, most of the benefits stem from the committee’s proposal to adopt a no-fault plan as well as the elimination and/or capping of benefits, [and] not from the establishment of a government monopoly.”

Both Furlong and Cooke agree that the public system proposed is actually proof that claims cost, specifically tort costs, are plaguing the system rather than the method of product delivery. The government has already proposed a “no-frills”auto policy, which would see insurers offer a basic level of coverage for a low cost and then optional covers for higher premium. As such, Furlong believes insurers could offer an even cheaper basic coverage package under such a system.