Canadian Underwriter

More backlash against Nova Scotia auto plan

October 30, 2003   by Canadian Underwriter

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Insurers and brokers continue to speak out against changes to Nova Scotia’s auto insurance system, in hopes of swaying the provincial government not to finalize the legislation.
“We are shocked and deeply offended by the punitive insurance legislation passed by the government of Nova Scotia”, says George Cooke, president and CEO of The Dominion of Canada General Insurance Co. “I strongly urge the premier not to proclaim this bill, start over and get it right.”
He refers to Bill 1, which passed third reading earlier this week and awaits proclamation to be signed into law. The bill has sparked anger throughout the industry, with critics saying the 20% rate decrease demanded by the government is irresponsible given that no relief is given on the claims cost side by the reforms. On top of the 20% decrease, the government extended its ongoing rate freeze until November, 2004.
“Nova Scotians deserve rate relief, but that can only be realized if compensation levels – which are set by the government and over which the industry has no control – are reduced appropriately,” Cooke adds.
His criticism was echoed yesterday by Peter Fredericks, president of the Insurance Brokers Association of Nova Scotia (IBANS), speaking at the Insurance Brokers Association of Ontario annual convention. He notes that because companies filing around the time of the May, 2003 rate freeze were denied increases, with the 20% decrease, some companies’ rates could drop back to 1999 levels.
And because the definition of “minor injury” has been changed relative to a $2,500 cap on tort claims for minor injuries, companies will see little or no claims relief, he adds. The new definition states that a minor injury is anything that is healed within 12 months, which may result in neck strains or other soft tissue injuries that a claimant says are still causing pain more than a year after an accident will be classified as severe injuries, and the threshold becomes meaningless.
Fredericks says the bill reflects concessions by the minority Conservative government to appease the opposition Liberals. The government’s own figures show that insurers would see at most a 5% claims savings under the reforms, while Insurance Bureau of Canada (IBC) data suggests there will be no savings at all.
In meetings with legislators, Fredericks says there was acknowledgement of this lack of claims relief. “You met with them and explained to them what the ramifications would be for the insurance industry, and they all agreed. They said, ‘yes, it’s going to decimate you industry’, and then they passed it [the bill] anyway.”
Brokers fear that the legislation will drive insurers from the province, as they see no hope of profitability. Cooke says his company will stop writing new business in the province for now, as it weighs its options. “We have a duty to our shareholders to invest their capital responsibly. These shareholders are members of pension funds, retirees and families who rely on our prudent fiscal management,” he says. “The government of Nova Scotia is telling us that, in order to continue doing business in that province, we must knowingly invest our shareholders capital at a certain substantial loss. This is simply unacceptable.”

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