Cost of public auto in New Brunswick would be $82 million

With the release of a committee report on the potential for public auto insurance in New Brunswick, cost of establishing the system has been pegged at $82 million.
The report, presented by NDP MLA Elizabeth Weir, the committee’s chair, is the result of seven months of hearings to come up with a possible public auto system in the province.
In its final report, the committee notes that such a system would cost $82 million, and about 1,200 jobs in the province, although this figure includes the loss of just auto-related jobs and does not take into account insurers potentially withdrawing from the province altogether. As well, the provincial government stands to lose almost $4 million in corporate and premium taxes, along with an estimated $700,000 in federal taxes.
The system includes the building of five regional claims centers and a head office in Moncton, NB to serve about a half-million vehicles in the province.
The expected average premium savings are just over $200 per policy, based on provision of a basic auto policy. While the Crown corporation will offer optional coverage for collision and comprehensive, as well as extended liability and accident benefits, private insurers will compete on these products.
The biggest change is that there will be no option to sue under the proposed system. Also, there will be no compensation for pain and suffering available.
The first insurer to react to the new system, Dominion of Canada General Insurance Co. CEO George Cooke, says one problem is the anticipated cost savings are based on figures available a year ago, and does not take into account reforms which have already lead to cost savings from private insurers. The average premium is now $1,020, he says, making average per policy savings just $27.
“Prices are lower, markets are returning, the Facility Association is reducing,” Cooke says. “New Brunswick should stand as an example representing what can be accomplished when the private sector and government work hard to protect the consumer.”
Cooke says the proposal sends the message that private investment is not wanted in New Brunswick, and also bears out that premiums are a result of product and claims, not of service delivery. Furthermore, drivers in low-risk categories female drivers, older drivers will subsidize high-risk drivers such as young males. Cooke points also to a recent study commissioned by the Atlantic Harmonization Task Force, which found no benefit in public auto systems.
The “hidden cost” of a public system, he adds, will be turning away private investment in the province, and the tax support it adds to funding such programs as health care and education. “If the recommendations of the Committee are accepted by the government, a strong message will be heard in the private capital markets: You may not be welcome in New Brunswick any longer. And be wary, any investment might be confiscated”.