August 27, 2003 by Canadian Underwriter
The package of auto insurance reforms announced by the Newfoundland government yesterday is drawing the ire of insurers. The Insurance Bureau of Canada (IBC) says the government needs to “rethink” the reforms as they will add confusion and additional cost to an already burdened auto insurance system.
“This package of reforms has very little to do with solving the problem and will, in fact, create some new ones,” says Stan Griffin, IBC president and CEO. “Our industry has proposed a number of cost control measures in Newfoundland and Labrador, and we are prepared to talk about real, workable and lasting solutions that will ensure the future affordability of auto insurance in the province.”
The system proposes and optional plan for coverage of minor injury pain and suffering claims something insurers say only offers a pretext of choice. Other changes include a 12-month freeze on rates, and new rules that prevent underwriting on the basis of age, gender and any factor other than driving record. “Even now, there are fewer companies operating in the province than elsewhere in Canada. The proposed changes will not serve to attract insurers. Under these circumstances, what kind of company would want to enter such a complicated and heavily regulated market? Consumers lose when competition is reduced,” adds Griffin.
The new underwriting rules are unfair, says the IBC, as they force drivers in low-risk categories to subsidize drivers in high-risk categories, specifically young drivers.
The IBC also argues that the reforms go against the promise of Atlantic premiers to work on a harmonized approach to auto insurance. Other provinces have introduced similar underwriting rules, but have not implemented the optional coverage model. Instead, those provinces have capped the payout for pain and suffering on minor injuries at $2,500.
“This reform package flies in the face of the commitment that Premier [Roger] Grimes made in June to bring about a common solution to the rising cost of auto insurance in Atlantic Canada,” states the IBC release.