February 25, 2004 by Canadian Underwriter
Insurers are proposing a “no frills” auto policy as a respond to growing public outrage about auto rates in New Brunswick.
In a release Tuesday, the Insurance Bureau of Canada (IBC) explains the policy will provide the basic liability coverage required by law and allow customers to choose options beyond this minimum. The proposal has been sent to Premier Bernard Lord for his review in an attempt to avoid the potential for public insurance being introduced in the province and to quell public discontent.
“Private insurance companies have been in New Brunswick since before Confederation and we want to remain here providing competition and choice to our customers,” says IBC president and CEO Stan Griffin. “We have listened to the government and to the people and we realize that we must move quickly to provide real solutions that will drive auto insurance rates down and ensure the long-term viability of our industry in this province.”
The five-part plan also includes provisions to remove drivers from the high-risk, high-premium Facility Association (FA). Currently, about 4.4% of insured drivers are in the FA, and the IBC plans to remove 7,200 policyholders by August of this year, reducing the FA’s marketshare to 2.5%. FA policies will be reviewed to determine which insureds belong in the voluntary market, and a toll-free number is being set up to help drivers make the transition. 1-877-U-ASK-IBC will also help drivers in the voluntary market to shop around for potentially lower rates.
As well, the IBC plans two consumer awareness campaigns one aimed at informing New Brunswickers about the new auto system in New Brunswick and another to promote the proper adjustment of vehicle headrests as a means to reducing whiplash-related injuries.
New Brunswick had introduced reforms last summer to reduce auto insurance rates, including a cap on awards for pain and suffering as a result of accidents. The package also included mandatory rate reductions and a rate freeze. However, Premier Lord also established a committee, headed by NDP MPP Elizabeth Weir, to look into the possibility of public insurance in the province.
“We believed the reforms recently introduced by government would help to solve the problem,” says Griffin, “but it’s become painfully clear that we need to accelerate the process.”
Among the changes under the proposed “no frills” plan is a reduction in income replacement benefits, with the option to buy extended access beyond the primary two-years of coverage for catastrophic losses. Death benefits are also reduced, with the option to purchase higher limits, even above the current limits. Even with the “optional” coverage added in, the IBC estimates an average policy cost of $850 annually, with an average cost of $750 for the “no frills” policy. This is compared to IBC estimates of an annual average rate of $900-$1,000 under the current system.