Government of Newfoundland and Labrador finalizes terms of reference for auto insurance review

The provincial government announced on Tuesday that it has finalized the terms of reference for the automobile insurance review for Service NL and the provincial Board of Commissioners of Public Utilities (PUB).

Government has directed PUB to begin its review and provide a report on auto insurance in Newfoundland and Labrador as part of its modernization of the system.

The terms of reference for PUB include specific instructions for two phases, Service NL noted in a statement. The first phase will consist of a closed claims study into private passenger automobile insurance and a separate closed claims study into causes of high taxi claims costs. Phase two will include a review of the existing private passenger auto insurance products offered in the province, as well as recommendations for possible options to contain costs.

The terms of reference for Service NL cover issues outside the scope of PUB’s mandate, such as assessing what new regulatory tools or legislative changes would be required to address emerging changes in auto insurance, the statement noted. Service NL’s terms of reference will also include an additional exploration of some matters that will be reviewed by PUB, including examining measures to improve highway safety, a “key area of interest as government builds on the momentum from the impaired driving legislation introduced in February 2017.”

The Insurance Bureau of Canada (IBC) said in a press release issued late Tuesday that it welcomes the terms of reference, which will provide for a “sweeping and comprehensive” review of the auto system in the province. “This is exactly what is need to make sure auto insurance is sustainable, available and beneficial when drivers need to make a claim,” Amanda Dean, vice president, Atlantic, with IBC, said in the release.

“Consumers in Newfoundland and Labrador ought to have an auto insurance system that provides effective rehabilitative care while keeping costs down,” Dean continued. “The terms of reference announced today lay the groundwork to achieve that. IBC is committed to working with the government, on behalf of Canada’s auto insurers, to help make the system more sustainable and more accessible for the people of Newfoundland and Labrador.”

Service NL noted in a backgrounder that certain parts of the review are independent of each other and may be provided to the ministry upon completion separately.

Related: Government of Newfoundland and Labrador conducting comprehensive review of auto insurance system

Among the components of Phase I, PUB is directed:

• To conduct a closed claims study to determine the costs associated with third party liability/Section A bodily injury claims arising from the use of private passenger vehicles, including the use (or no use) of interim payments and whether accident benefits were available:
• To review the impact on rates of a monetary cap on claims for non-economic loss for minor/mild injuries and the implications of such a cap for claimants;
• To review the impact on rates of continuing with the current deductible of $2,500 or increasing the deductible; and
• To conduct an audit of taxi closed claims to determine the causes of poor claims experience, including details regarding the underlying causes of loss and high claims costs incurred, and provide any recommendations to reduce claims costs and reduce rates.

Phase II will review the existing private passenger automobile insurance products and assess and recommend possible options to contain costs. PUB is directed:

• To review the auto insurance product offered in Newfoundland and Labrador and conduct a jurisdictional scan of other provinces’ auto insurance product offerings;
• To review the current mandatory Section A/third party liability limit of $200,000 and the rate implications of increasing the limit;
• To review Section B/Accident Benefits coverage and impact on rates with respect to:
  • Coverage limits on medical and rehabilitation benefits and indemnity for loss of income;
  • Benefit payment practices (i.e. advance payments versus reimbursement);
  • Order of payment of benefits in relation to other insurance plans;
  • Timeliness and efficiency of the injury assessment process;
  • The relationship of Section B benefits to the settlement of Section A benefits; and
  • Whether the coverage should be mandatory.
• To review the impact of Newfoundland and Labrador adopting minor injury diagnostic and treatment protocols such as those provided in Alberta and Nova Scotia and how mandatory Section B coverage and the diagnostic protocols would impact Section A claims costs;
• To review the impact of offering direct compensation for physical damage to automobiles (Section C);
• To review Section D Uninsured Automobiles coverage in the province;
• To report on measures to improve highway safety and automotive accident prevention in Newfoundland and Labrador;
• To review the financial profitability of the auto insurance industry in the province;
• To review the current auto insurance market and provide comment of insurer exits and report on ways to encourage new entrants into the market; and
• To report any other cost savings or other improvements on any aspect of automobile insurance offered in the province.

For Service NL, terms of reference include the following:

• To gather opinions and evidence on measures to improve highway safety and automotive accident prevention in Newfoundland and Labrador;
• Assess what new regulatory tools or legislative changes would be required to address emerging changes in auto insurance including usage-based insurance, telematics or ridesharing type product offerings;
• To review ways to encourage new entrants to the auto insurance market or to encourage increased competition amongst auto insurance companies in the province;
• To review the issue of vicarious liability and primacy with respect to non-negligent short-term vehicle rental and long-term lessors; and
• To review and provide any other recommendations on any other aspect of automobile insurance to improve the auto insurance product offered in this province, such as the creation of a risk sharing pool.

No timeframe was set for the announcement. Although Service NL’s formal consultations will begin after the closed claims studies are complete, individuals wishing to begin sharing feedback are encouraged to email autoinsurance@gov.nl.ca. Details on the formal consultations will be announced in the future.