Industry “Hot and Cold”On N.B. Auto Reform Package

While welcoming confirmation the New Brunswick government has abandoned the idea of a public auto insurance system, insurers remain concerned that the announced reforms will not reduce the cost of providing insurance. “We believe the government decision to preserve competition and choice is the right decision,” says Don Forgeron, Atlantic region vice president at the Insurance Bureau of Canada (IBC).

However, Forgeron also expects the legislative changes will herald “more regulation, more cost and more interference”. Insurers will pay the bill for the creation of an “Insurance Review Board” and a “Consumer Advocate for Insurance”. The Insurance Review Board will approve rates, and investigate rate issues in the homeowners’ and liability lines of business. The Consumer Advocate will “act as a watchdog over auto insurance premiums and insurance company practices”.

The main item of the reform package is a “no-frills” coverage option, which the government expects will produce an average 10%-15% rate savings. The no-frills option includes a $1,000 deductible on damages, and reduces by half the accident benefits available. Third-party liability claims will also be paid on a no-fault basis by the driver’s own insurance company. Only “non-economic losses” will be decided through tort, which has been capped at $2,500.

In a statement, provincial premier Bernard Lord notes, “the government is prepared to go further with reforms that will not only lower premiums, but also force accountability and transparency on the insurance industry”. Insurers remain opposed to the removal of underwriting rating criteria, such as age and marital status, in the new rules. The reforms are expected to be implemented by January 2005, a timeline Forgeron says is manageable.

In its final reform package, the New Brunswick government rejected findings supporting the creation of a government auto insurer, as presented by the Weir Report. Government actuarial studies suggest auto premiums under such a system would be higher than currently available, while the start-up cost of a crown insurer would be in the region of $120-$190 million (the Weir Report indicated $80 million).

The Co-operators CEO Kathy Bardswick commends the decision to turn away from public auto. She notes, “we have always maintained that problems with automobile insurance relate to the nature of the product and what it covers, not who produces it or how it is distributed”. Dominion of Canada CEO George Cooke comments, “I have said before that recommendations in the Select Committee’s [Weir] report were unworkable and would deliver fewer benefits to consumers at a greater cost and risk to New Brunswick taxpayers. It’s personally gratifying…the premier has accepted these facts.”