September 4, 2003 by Canadian Underwriter
Proposals by the Newfoundland government to change that province’s auto insurance system are the cause of Federation Insurance Co. of Canada’s decision to stop writing personal lines in that province, the company says.
In a media release, the company says it will stop writing new business in both auto and homeowners, and discontinue renewals as of the end of the year.
“Based on the latest legislative proposals for automobile insurance, it would be inevitable that Federation would lose money by operating in the province,” states the release. “It would not be prudent to maintain business in the province under those conditions, as Federation and The Group [parent company The Economical Group] have a fiscal responsibility to all our policyholders across Canada.”
The company adds that it is concerned with how the suppression of needed rate increases will impact the Facility Association, the pool for high-risk drivers. All companies writing in the province pay for losses stemming from Facility policies based on volume of business. In 2003, Federation had direct written premiums of $8.5 million, ranking it number six in the province in the auto line.
Overall Federation, the only member of The Economical Group writing in Newfoundland, had direct written premiums of $10.75 million and ranked seventh in the province in 2002.
The Insurance Bureau of Canada has opposed the proposed changes to the auto insurance system, announced in late August. Among the proposals is a “choice” system for coverage of pain and suffering resulting from minor injuries, a 12-month freeze on rate increases, and underwriting limits that prevent assessing risk on the basis of age, gender and any factor other than driving record. IBC Atlantic region vice president Don Forgeron calls the proposals “a negative piece of legislation” and while he could not say if other insurers would leave the province, he notes, “companies do look at the regulatory landscape when making the decision whether or not to do business in a province”.
Insurers may have some respite as the government has decided not to table the legislation until after the next election. Premier Roger Grimes has called for an independent party to organize a public debate of the auto insurance issue with opposition parties outside of the House of Assembly.