October 28, 2003 by Canadian Underwriter
On the heels of the passage of Nova Scotia’s Bill 1, which would reform the province’s auto insurance system, insurers and brokers are scrambling to have the legislation delayed. The bill, in its present form, contains amendments that would roll back rates, but give no relief for rising claims costs, both groups say.
“It is in the best interest of consumers to postpone proclamation of Bill 1,” says Insurance Bureau of Canada (IBC) president and CEO Stan Griffin. “In its current form, Bill 1 fails to deliver on the government’s promised cost savings.” He adds that the IBC has looked at the Conservative government’s analysis of the bill, and the numbers do not add up to the 20% discount on rates the government expects to see.
“We challenge the government to make public its own analysis of the bill,” says Griffin. “Right now, they are irresponsibly pushing ahead with a product that both the Conservatives and the Liberals know is not financially workable.”
These sentiments were echoed by the provincial broker association. “I just find the whole thing incredible,” says Stephen Greene, executive director of the Insurance Brokers Association of Nova Scotia (IBANS). Originally brokers and insurers had applauded the government’s announcement that it would cap tort claims for minor injuries at $2,500. “Consumers deserve a 20% decrease in rates and we supported the legislation because we believed it had a definition of minor injuries that would allow insurers to generate 20% in savings.” But the process was hampered by negotiation between the minority Conservative government and the opposition Liberals that led to a new definition of minor injuries which makes the cap basically null and void. The new definition of minor injuries means that only a 5% savings can be achieved, says Greene, but the government is nonetheless proceeding with the bill, “knowing that in effect they are asking companies to take a 15% cut.”
Consumers will be most hurt by the legislation, Griffin says, despite immediate rate relief, because availability problems will only worsen when companies do not want to grow their business on a product that only leads to losses. Greene says he fears the bill will cause insurers to leave the province, to choose not to take any new business, or to impose even stricter underwriting on consumers. At worst, he says, the bill is in effect pushing the province toward a public auto insurance system. “The [provincial] NDP are showing more committed to public auto than the Conservatives or the Liberals are to private auto,” he notes. “This [legislation] is a step in the direction of public auto because it’s set up a private system that doesn’t work.” He says the bill almost “dares” insurers to leave the province. “It’s almost a game of chicken. It’s very irresponsible.”
This is especially troubling coming on the heels of a report by the Atlantic Harmonization Task Force suggesting public auto gives consumers no cost savings over private systems.
Greene admits there is little chance that the bill will not be proclaimed, but hopes the government will have second thoughts.