Auto insurance should provide peace of mind, but for many drivers in New Brunswick, sudden and unexpected rate increases have become all too common over the last 10 years. Unfortunately, the province’s outdated automobile insurance system not only fails to shield consumers from these rate spikes, but may actually contribute to them. New Brunswick’s process for setting auto insurance premiums is one of the most time-consuming, costly and inefficient in the country. This process can contribute to large, unpredictable auto insurance rate spikes, which are particularly unwelcome at a time when affordability and predictable budgets are so important for New Brunswickers.
Why are New Brunswick’s good drivers being saddled with unpredictable automobile insurance rates?
The answer lies in how the provincial regulator is required to approve or amend proposed automobile insurance rates. If an insurer applies for an increase of more than 3% annually, it must participate in a costly hearing process that typically takes more than 10 months to complete. This means that by the time an insurer receives approval or amendments for annual rates, they need to file for rate approval again. Insurers are more than happy to respond to questions examining their proposed annual rates and provide actuarial data to the New Brunswick Insurance Board (NBIB) to satisfy that a proposed rate change is just and reasonable, but the cumbersome nature of the process costs New Brunswickers.
New Brunswick consumers are well protected. The NBIB does good work to ensure drivers in the province are paying fair and justifiable rates. The Financial and Consumer Services Commission ensures that insurers are adhering to all regulatory requirements and that agents and brokers are sufficiently trained and properly licensed in the province. The Consumer Advocate for Insurance is a legislative officer (the only such role in the country) tasked with educating consumers, investigating consumer complaints and working with the insurance industry to ensure fair conduct. Finally, consumers may also work with the General Insurance OmbudService on policy questions and dispute resolutions.
All of these resources aim to educate, protect and assist consumers when needed. However, New Brunswick’s costly and lengthy rate approval process fails to protect consumers from rate shock. In fact, its design encourages rate shock. The time and costs required to obtain rate approval are ultimately passed along to New Brunswick drivers. With costs that can be in the hundreds of thousands of dollars and time frames that frequently exceed 10 months, the approval process encourages insurers to wait until rates become unsustainable to justify the expense and time of applying for any increase beyond 3%. Effectively, the process that was set up to protect consumers instead serves to encourage premium shocks.
Why do insurers ask for rate increases?
Like any business, insurers have faced increasing cost pressures. The cost of replacing and repairing vehicles has increased, and weather damage has increased in frequency and severity in every region of the country, resulting in a greater number of insurance claims. The increase in auto theft is another pressure for the industry in New Brunswick. Unfortunately, the province has become the auto theft capital of the Atlantic region, with 788 auto theft claims in 2024 costing over $16 million.
To protect consumers, the NBIB does a thorough job of holding insurers to account for any proposed rate increases. It analyzes data, seeks additional information from insurers, and approves or amends rate filings on a company-by-company basis. But the system encourages insurers to avoid smaller incremental changes for as long as possible, resulting in rate spikes every few years.
What can be done?
Other Canadian provinces have recognized this problem and have taken action to protect drivers. For example, some provinces allow insurers to make minor, periodic rate adjustments to help stop premium shocks. There is still oversight, but it is a more streamlined process.
New Brunswick’s auto insurance legislation hasn’t seen updates that were consumer centric in over a decade, despite significant advances in vehicle technology and different consumer expectations. Even adopting simple innovations, such as ride-sharing services and usage-based insurance, has been difficult due to the rate regulatory environment as those products require flexibility to respond to consumer demand.
Modernizing the auto insurance system by updating the Insurance Act would help level the playing field between consumers in New Brunswick and other Canadian jurisdictions. It would help ensure rates are more predictable for New Brunswick drivers and allow for more agile and competitive pricing and innovative products in the insurance market.
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