How the minor injury cap increase will affect auto insurance rate applications in New Brunswick

The New Brunswick Insurance Board announced last week that carriers offering auto coverage in the province will not be allowed, when filing rate applications this December for 2014, to include “conversion factors or trends” developed to estimate the effect of a tripling of the cap on minor injury claims.

Auto insurers must file rate applications with NBIB by Sept. 15 every year. However, this year, the carriers will be allowed to file amended rates for private passenger auto Dec. 2, because NBIB held a hearing in early October to consider the impact, on loss costs, of a policy change last summer. 

On July 1, the province increased the cap on non-pecuniary awards for auto claimants with minor personal injuries from $2,500 to $7,500. NBIB allowed carriers to file “simplified” rate applications Sept. 15 because those applications were due before the generic hearing in October.

The Insurance Bureau of Canada and Intact Insurance were two of the five parties granted intervenor status.

IBC submitted a report – prepared by Barb Addie of Toronto-based Addie Insurance Services Inc. – which predicted conversion factors for four different categories of auto claims. The highest conversion factor, of 1.331, was for both third-party liability-bodily injury and for uninsured motorist. The cap applies to contusions, lacerations, sprains, strains and whip-lash associated disorders that do not result in a serious impairment or permanent serious disfigurement.

In its decision released Oct. 17, NBIB said it “recognizes that the ultimate upward impact on bodily injury loss costs will probably be in a range between 20% – 31.3%” but added the timing of that impact “is highly uncertain.”

NBIB also noted this impact “is attributable solely t the Bodily Injury loss costs and Uninsured Motorist Coverage” and that those two coverage types “are but one component of a full policy of automobile insurance.”

So in its guidance, NBIB ruled that carriers “will not be permitted to include conversion factors or trends that are developed expressly for the purpose of estimating the impact” of the increased cap on minor injuries.

“Beginning in 2014, rate applications submitted for rates effective beginning in 2015 and beyond will be permitted to include conversion factors and trends for the impact of the amendments to the MIR applicable for those rates,” NBIB wrote in its guidance.

“These conversion factors and trends will have to be justified on a case-by-case basis by the insurer submitting the rate application. The conversion factors and trends will have to be based on available data from the post-reform period. “