Co-operators and Newfoundland government at odds over selling practices

Co-operators General Insurance Co. and Newfoundland’s Minister of Government Services and Lands Walter Noel are locked in a verbal battle over the company’s selling practices in that province. Recently Co-operators decided not to renew about 1,300 auto policies for customers who do not have multiple policies with the company.
Noel admits that this practice does not violate any Newfoundland law, but says, “I have asked the company to stop this practice. It appears to be coercive-tied selling and I find it highly inappropriate.”
He goes on to add that such a practice could become illegal when new insurance legislation is proposed, and that other provinces ban the practice.
“Clients refused renewal are apparently offered an auto insurance policy with a high-risk insurance company at a much higher premium,” states a ministry press release. “In some cases, drivers without accidents are being placed with this high risk insurer.”
Co-operators has responded to Noel’s request by defending the practice and noting that the group affected, auto-only policyholders in St. John’s, has the highest loss ratio in the province.
The company currently pays out $2.05 in claims for each dollar in premiums collected for the affected policyholders, who represent 5% of the company’s clients in the province. This compares with a loss ratio of 164% for multi-line clients and 104% for the Atlantic region as a whole. The company reports a loss of $5 million in Newfoundland auto last year.
Co-operators’ position is that the company’s 28,000 other drivers should not have to subsidize the losses of the 1,300 affected policyholders. Co-operators also notes that it will continue to sell auto-only, but at higher rates.
“The steps we have taken are perfectly legal. They are somewhat drastic but we are trying to stay in business in the province,” says Co-operators CEO Kathy Bardswick. She adds that the government should be stepping in to deal with the high loss ratios insurers as a group are experiencing in the Atlantic region. “The government cannot simply make these allegations and then do nothing to reform an auto insurance system that is fundamentally flawed.”