Changes to New Brunswick’s Car Insurance System

In 2003, New Brunswick was the first private sector province in Canada to make serious cost-saving reforms to its auto insurance system in some time. The reforms in New Brunswick have certainly been among the most effective in bringing down auto insurance premiums. As did most other provinces, New Brunswick experienced an extremely difficult insurance market between 2001 and 2003, in which insurers’ costs escalated rapidly. This led to premium increases and made it difficult for some drivers to get affordable coverage. But changes implemented by the New Brunswick government between 2003 and 2005 brought about lower premiums and more choice for consumers than ever before.

Where do the savings come from?

The centrepiece of the reforms in 2003 was a $2,500 cap on “pain and suffering” awards made by courts to people who have sustained minor, non-permanent injuries in a car collision. In the past, these awards, which go above and beyond compensating a victim for actual economic losses, could have been large for people who had suffered only a minor sprain or strain. Although claimants were entitled to them, these awards were the primary factor driving up auto insurance premiums for everyone. The cap, in place since 2003, has effectively controlled the cost of claims, while not affecting the amount of money available to victims for medical care or to replace lost income.

Affordable insurance for all New Brunswickers

With the cap making auto insurance more affordable in general, other changes were made to ensure that all New Brunswickers shared in the savings. Before the cap, when many insurers were losing money, some attempted to reduce their losses by insuring only people considered to be low risk. Drivers considered to be higher risk would often have to pay substantially more to be insured through the insurer of “last resort,” Facility Association. Rules were put in place in 2003 to prevent insurers from denying coverage based on age, marital status, age of car, not-at-fault accidents and a number of other factors. These rules helped drivers with fairly clean driving records, who had been insured through Facility Association, pay a lot less for car insurance.

The First Chance premium discount, introduced during a second round of reforms early in 2005, offers new drivers with a clean driving record the opportunity to pay rates comparable to those paid by experienced drivers with clean records. As the name implies, even one traffic-related conviction or at-fault accident means you could lose the discount.

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