Newfoundland auto reform looms

The Newfoundland government is putting auto insurance reform on the table, releasing a discussion paper that proposes restrictions on the ability to make claims for pain and suffering as a result of minor accidents.

It is expected that medical and financial claims will remain accessible, and claims for pain and suffering on permanent or serious injury cases. Government Service and Lands Minister Walter Noel says the new restrictions are a response to rising claims costs, and rising premiums. “The major cause of increased insurance costs is claims for non-economic loss. People have to decide whether they want lower rates likely to benefit many, or the retain option to sue likely to benefit few.”

Should the restrictions be put in place, the government is prepared to mandate an immediate reduction in third party liability rates, to the tune of about 35%. Other key proposals include mandatory accident benefits coverage and restrictions on the reasons insurers can deny coverage. There will also be clearer communication with insureds who are placed in the Facility Association (FA) as to the reasons for that placement. Concern has been raised over the high number of Newfoundland motorists that have been placed in the FA, a pool for high-risk drivers, by insurance superintendent Winston Morris. The province is also proposing that the Property and Casualty Insurance Compensation Corporation (PACICC), the body which covers claims in the event of insurer insolvency, cover 100% of unearned premiums in the province. With the failure of the Hiland insurance company about five years ago, Morris had raised concerns that PACICC did not cover the full 100%. In an interview earlier this year, he estimated that $5 million in unearned premiums were lost as a result.

Morris noted that, while PACICC has plans to cover a portion of unearned premiums, when previously only outstanding claims were covered, this was just a “good start”. He, along with other insurance superintendents in the Canadian Council of Insurance Regulators (CCIR), planned to look into the unearned premiums issue. Feedback on the discussion paper is expected this month. –