Newfoundland and Labrador’s decision to remove 5% of the retail sales tax paid on auto insurance premiums over the next four years will help return stability to the market, the Insurance Bureau of Canada (IBC) said Tuesday.
Tom O’Handley, manager of government relations in the Atlantic region for IBC, said in a press release that the move is a “significant step in the right direction” to return stability to the auto insurance market in the province. “Auto premiums in Newfoundland and Labrador are already the highest in the Atlantic region,” he said.
“We need to fix the current system,” O’Handley said, noting that it now costs drivers in the province more than their counterparts pay elsewhere in Atlantic Canada. “In fact, on average, premiums are 40% higher here,” he reported.
“Drivers in the province are unhappy with their high premiums, their limited choice, and the increasing presence of uninsured drivers on the road. This change will make auto insurance more affordable for consumers and that is a very positive move.”
Provinces across Canada charge provincial tax on select forms of insurance premiums, usually in the range of between 5% and 9%. The rate in B.C. is 7%, while in Ontario it is 8% and in Quebec it’s 9%.
It seems unlikely that Newfoundland and Labrador’s decision is part of a larger trend, but last month, the government of Saskatchewan announced that there would no longer be a provincial sales tax on agriculture, life and health insurance premiums. The Canadian Press reported that the exemption covers premiums for crop, livestock and hail, as well as individual and group life and health insurance. It is retroactive to Aug. 1, 2017, the same day the province started adding the 6% PST to insurance premiums. The change is expected to cost the province $65 million in revenue forecast for this fiscal year and $120 million for the following year.
In addition to the removal of Newfoundland’s retail tax on insurance premiums, IBC said it also strongly supports the provincial government’s upcoming auto insurance review.
The review will “hopefully result in more substantial, fair and sustaining reforms to bring even more relief to Newfoundland and Labrador drivers,” the association for auto home and business insurers said in a statement. “IBC is hopeful that in the upcoming provincial review, the government will consider how to encourage more insurers to compete in the marketplace and offer more choice and lower prices to Newfoundlanders and Labradorians.”