Wawanesa to abide by New Brunswick decrease despite “concerns”

Wawanesa Insurance plans to abide by an agreement between insurers and the government of New Brunswick to reduce auto rates in the province by an average of 13.5%.
But the province’s largest auto insurance writer said it was “concerned” about the deal’s long-term implications, given that auto rates were already falling in the province.
“Wawanesa Insurance will implement the further government-mandated automobile insurance rate reductions announced today, despite our concerns,” Wawanesa president and CEO Gregg Hanson said in press release.
“We share with the government of New Brunswick the objective of stable insurance rates for New Brunswick drivers now and in the future,” he said.
All the same, those rates had already been going down, Hanson noted, because the claims costs had been going down.
Hanson said the “price of insurance follows the cost of claims” and therefore “if you control the cost of claims, you stabilize the price of insurance.”
Since July 2003, as claims costs have dropped, Wawanesa reduced rates by more than 20%, Hanson noted.
“The Government of New Brunswick made a campaign promise to further reduce auto insurance rates for New Brunswick consumers,” Hanson said. “It is unfortunate that they felt compelled to circumvent the province’s own existing independent body, the New Brunswick Insurance Board.
“Rates were already declining as claims costs were coming down. This political intervention would not have been necessary in an industry where competition exists and extensive regulation is already in place.”
Hanson added that just as increasing insurance rates too severely at a point in time can create difficulties for consumers, reducing rates too much at one time can create future risk of instability.
The New Brunswick Insurance Board recently approved Wawanesa’s rate reduction of 7.5%, effective Jan. 1, 2007. New Brunswick’s recent directive calls for insurance companies to reduce premiums by 13.5%, which would amount to another 6% for Wawanesa.