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FAQs for Auto Insurance Customers



1. Does Insurance Bureau of Canada (IBC) – that is, its industry members – want the Newfoundland and Labrador (NL) government to reform auto insurance?

It is clear to the industry that the NL auto insurance system is not working. Consumers in this province pay too much for auto insurance, and reforms are needed to bring back a sustainable system that works for drivers.

IBC has met with the NL government and explained that as a result of the auto insurance reforms introduced in 2004, there is not the same cost stability in NL as there is in the other Atlantic provinces. Thirteen years is too long to wait to review such a heavily regulated consumer product. We are committed to working with the government to find a solution for consumers and the industry. IBC believes it’s time to make the NL auto insurance system work for drivers.

 

2. If insurers are losing money, why are they still doing business in the province?

Insurers want to keep serving NLers – but it's increasingly difficult. In 2015, 92% of what was paid in premiums by NLers was paid out through claims in the province. That means that after paying NLers within the industry to serve customers, paying for office space, and paying the various taxes and levies that the industry is charged, it cost insurers to do business within the province. Those numbers have been that poor for a number of years. There has got to be a solution that balances getting people back on their feet following a collision, against the premiums that the many pay.


3. Why are auto insurance premiums in NL higher than in the other Atlantic provinces? Are we worse drivers?

The major reason why drivers in NL pay the highest annual average premiums in Atlantic Canada is that claims costs, and frequency of claims are higher.

 

4. My broker tells me that three companies in NL have more than 76% of the auto insurance business. Is this lack of competition preventing me from getting a reasonable insurance premium for my vehicle?

IBC and its members believe that the best thing for consumers is healthy competition. Insurers which write auto insurance policies in NL have been losing money for several years. For every dollar of insurance they underwrite, it costs them far more than a dollar to do business. Given this challenging business environment, new insurers have been reluctant to enter the NL market – not to mention the current barriers to entry that prohibit new insurers from entering the market. In fact, in recent years, insurers have left the province because they were unable to cover operating expenses. Auto insurance in NL is simply not sustainable for many insurers. And with a reduction in competition, consumers are left with few options.

 

5. When the government reforms auto insurance, will we lose the right to sue for damages for injuries?

Our members believe that consumers should have access to immediate and necessary care after a collision. The longer it takes to get physiotherapy, occupational therapy or other care, the less chance there is for a full recovery. Having to wait for care is wrong. When we're asked this question, it's often in reference to the reforms that the other Atlantic provinces undertook in the early 2000's. The reforms that the other Atlantic Provinces undertook in the early 2000's still protect a victims right to sue the at-fault party in a motor vehicle collision.  

 

6. Insurance companies have lots of money. Why should I care if they aren’t making money in NL?

If the remaining insurance companies in NL continue to lose money and are unable to cover operating expenses, as they have for several years now, there is a good chance they may leave the province. This will further reduce competition in NL, leaving drivers with very few options if they’re unhappy with the premium offered by their insurer.

When people buy auto insurance, their money goes into a premium pool which is where insurance companies draw from to pay claims for bodily injury and property damage resulting from collisions. Auto insurance simply isn’t sustainable if the amount of claims incurred is greater than the premium pool.

 

7. Why do insurers want the government to reform auto insurance? Is it so they can make more money?

No. Insurers want to provide a sustainable, affordable product to consumers. As of right now, it’s difficult for new companies to enter the NL market and difficult for insurers to be approved for premium increases when they are necessary.

 

8. Should NL develop a public auto insurance system like in BC? It’s claimed to be cheaper and the money stays in the province.

Public auto insurance in BC is not benefiting consumers. BC drivers pay some of the highest premiums in Canada but receive less compensation for injury claims. Additionally,  the initial setup of such a system is a multi-million-dollar proposal that would be funded by taxpayers. The additional reduction in private-sector investment, not to mention community partner projects (which many private insurers are quite proud of), would have a negative impact on the province.


9. Are taxi drivers in NL responsible for our high premiums? Is it true that they are bad drivers and have made the situation worse for the rest of us?

Insurers rate taxi drivers differently than private passenger drivers. The driving records and collision history of taxi drivers do not affect the mainstream markets that insure the majority of private passenger vehicles.

 

10. Should NL introduce a minor injury cap like in Nova Scotia and New Brunswick?

In the late 1990s and early 2000s, the cost of auto insurance claims in Nova Scotia and New Brunswick was increasing faster than inflation, causing premiums to rise. To help lower premiums, in 2003 and 2004 these provincial governments introduced a cap on pain and suffering awards for people with minor injuries, such as sprains and strains. NL opted for a $2,500 deductible on these awards instead. Since then, the cost of bodily injury claims in NL has continued to go up. Compared to the other Atlantic provinces, the overall frequency of claims in NL is concerning.

Reforms are needed to bring the system back to a sustainable level for all drivers. Our industry is advocating for the government to conduct a detailed review and to study examples of healthy markets.