Canadian Underwriter

90% of drivers in this province think that insurance companies are “profitable”

May 15, 2018   by Jason Contant

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Nine out of 10 drivers in Newfoundland and Labrador believe insurance companies operating in the province are profitable, according to a new poll commissioned by Aviva Canada.

“I cannot speculate about why people seem to believe this, but I can tell you about the facts: the government’s recent Oliver Wyman Report Profit and Rate Adequacy Review – Private Passenger Automobiles concluded that the current market isn’t working,” Gordon Murray, Aviva Canada’s vice president of broker distribution in the Atlantic region, told Canadian Underwriter Tuesday.

Oliver Wyman’s report says the standard approach used by insurance companies is to measure and report profits on an after-tax basis expressed as a percentage (return) on equity. For both accident year 2016 and 2015, provincial insurers’ ROE after-tax was -8%. (The provincial Board of Commissioners of Public Utilities’ guideline target profit level for private passenger automobile rating filings is an ROE of 10%).

This March, Aviva Canada reported that it “pays out more to settle claims in Newfoundland and Labrador than we collect in premium dollars, which is unsustainable.” Murray told Canadian Underwriter that the insurer has been in discussion with the provincial government “for some time,” and that the government agrees meaningful reforms are needed to stabilize the auto insurance system for drivers across the province.

Amanda Dean, Insurance Bureau of Canada’s vice president of the Atlantic region, said some within the market “have suggested that insurers are making money.” The report on profitability and General Insurance Statistical Agency data “factually prove otherwise.”

The poll of 400 residents released earlier this week was conducted by MQO Research last month. It found that two-thirds of polled drivers said that auto insurance has become “financially difficult” to pay for.

When asked if there was anything in particular that stood out regarding the poll, Murray pointed to two other findings, besides the belief that insurance companies are profitable (90% said yes, 8% didn’t know and only 2% said they were losing money):

  • Uninsured drivers are seen as a significant issue in the province. The vast majority feel it is having an impact on premiums (69% said a big impact on insurance rates, while a further 19% said it had a small impact). Almost all (97%) of drivers agree insurance premiums should be based on driving and claims history; drivers with a clean driving record pay less for their premiums and drivers with a poor driving record pay more; and
  • Many would like to see more competition in the market.

Newfoundland and Labrador drivers pay the highest auto insurance premium rates in the Atlantic region: $1,090 per year on average. Premiums increased 22.4% from 2008 to 2016, compared to 11% at the same time in other Atlantic provinces.

Dean said the study coincides with what IBC has been hearing within the Newfoundland and Labrador market. “Insurers have been doing business at a loss in the province for the past few years, as they genuinely want to serve their customers. However, that’s getting increasingly difficult without substantial reform to the auto insurance product. We’re hopeful governments current review will result in the needed change.”

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1 Comment » for 90% of drivers in this province think that insurance companies are “profitable”
  1. paul armstrong says:

    It’s ironic that Newfoundland and British Columbia share similar problems.
    They cant make money on auto insurance even with two different systems.
    In Newfoundland, having more competition will not level premiums unless new insurers are prepared to share the same loss profile as current writers.
    Insurers withdrawing from NFLD cant lose but the people and government will.
    In BC, competition isn’t a solution if you have a government approving rates .Sooner or later the new competition will be in the same hole as the government.
    Both provinces have unlimited problems brought on over time and it will take time and “a will” to correct.

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