Insurers unhappy with Newfoundland reforms

Bill-28, introduced in Newfoundland to change the province’s auto insurance system, is raising ire from the insurance industry. The Insurance Bureau of Canada (IBC) says the regulative changes do nothing to deal with escalating physical injury claims costs at the root of premium increases.

The bill is “focused on the symptoms, not on the illness”, observes IBC Atlantic region vice president Don Forgeron. He says the bill creates more regulation in an effort to “micro manage” the system. “It tries to have all insurance companies look at risks in the same way,” he adds, referring to new underwriting guidelines that prohibit insurers from refusing to write risks based on age, sex, marital status or if coverage has lapsed. The province has been dealing with rising premiums and market availability issues, with insurers having lost money in successive years there. “My concern is it’s a very small marketplace. We ought to be doing everything we can to attract business and this bill is not in the spirit of attracting business.”

Minister of Lands and Government Services, Walter Noel, says he understands that high claims costs are at the root of the problems. “Government is taking significant actions to promote driving safety, but the only way to reduce premium prices dramatically is to reduce the cost of claims. A meaningful difference is only likely to occur in the short term if restrictions are accepted on claims, particularly in the area of minor, often questionable, soft tissue claims.”However, he says there is no public will to cap compensation for minor injuries.

That said, Noel intends to look into a possible “no tort option” system where consumers would pay less for a policy limiting such compensation. Such a system exists in Saskatchewan and Pennsylvania. The IBC argues that this system would be difficult to manage in a market of just 500,000 people.

Other provisions of the bill prohibit tied selling and give new powers to the superintendent of insurance over the Facility Association pool for high-risk drivers. As well, the industry’s compensation fund, PACICC, will now have to pay 100% of unearned premiums in the event an insurer collapses.