March 26, 2019 by Greg Meckbach
Nova Scotia’s auto insurance regulator is not letting The Dominion of Canada General Insurance Company take marijuana legalization into account when calculating this year’s rate increases.
The Dominion said in a rate change application that claims frequency will likely go up as a result of the legalization of recreational marijuana, the Nova Scotia Utility and Review Board wrote in Dominion of Canada General Insurance Company (Re), released Monday.
“The Board declines to allow any adjustment in indications for the legalization of the recreational use of cannabis until the Nova Scotia, or Canadian, experience shows that the legalization did have an impact on frequency,” NSURB chair Peter Gurnham wrote.
The Dominion – which was acquired in 2013 by The Travelers Companies Inc. – can go back to NSURB with a new rate application if they get new data showing the effect of recreational cannabis legalization on auto claims frequency.
NSURB did allow The Dominion to change its rates such that the new rate, across all coverages, would essentially be 13.3% higher than the old one. This does not necessarily mean that every motorist will see a 13.3% increase.
The new rates take effect May 21 for new business and June 24 for renewal business.
What NSURB did not allow was for The Dominion to adjust its claims frequency by 1.35% for some coverages to account for cannabis use.
The Dominion cited a bulletin from the United States Highway Loss Data Institute that refers to a study of the increase in claims frequency for the states in which recreational use of cannabis was legalized, compared to neighboring states where recreational use is still illegal.
“The U.S. Study concluded there is a statistically significant increase in collision claim frequency of about 2.7%. The individual state results vary significantly and showed even higher increases that ranged from 4.5% to 13.9%,” wrote Gurnham.
So The Dominion applied to adjust claims frequency to 1.35% (or half the 2.7% increase reported south of the border), in Nova Scotia, for accident benefits, collision, property damage-tort and direct compensation property damage.
“The Company believes this is a prudent, measured approach to reflect the impact of “a significant industry event’,” Gurnham said of The Dominion’s rate filing.
NSURB staff countered that auto claims frequency may have already been affected by medical marijuana, which was already legal in Canada before recreational marijuana was legalized.
“It is noteworthy that a 2018 update to the study cited by Dominion suggests the methodology used to produce the 2.7% frequency increase would now produce a 6% frequency increase. While Colorado and Washington show significant increases in frequency, the results for Oregon show no real difference,” wrote Gurnham.
“If a new Canadian/Nova Scotia claims frequency impact emerges, Dominion can then reapply to the Board.”