Minister Noel reports on public response to consultation paper on automobile insurance

Government Services and Lands Minister Walter Noel today released information regarding 1,077 submissions received in response to a consultation paper on automobile insurance issued October 4, 2001.

Most of the proposals in the paper reflect recommendations of a Select Committee of the House of Assembly. The paper is based on an assessment of the Select Committee�s recommendations, and a thorough analysis of issues by a committee of ministers and departmental officials.

The consultation paper contained 51 proposals for reform which cover a wide range of issues including a restricted tort system, which would limit non-economic loss claims to injuries of a permanent and serious nature, with a $15,000 deductible. It also has proposals for making accident benefits coverage mandatory and more generous; regulating underwriting guidelines; increasing penalties for uninsured and impaired drivers; appointing an advocate to represent consumer interests at Public Utilities Board rate hearings; protecting insurance premium payments if insurance companies go out of business; increasing capital requirements for insurance companies; and improving claims adjusting and appraisal practices.

Minister Noel said: "We have had a great discussion of the issues. I want to thank everyone who contributed to helping improve awareness of the complexities and challenges we are facing. There appears to be broad public support for implementation of most of the proposals. However, there is strong opposition to the option of restricting compensation for less serious injuries, which appears to be the most promising way of keeping insurance rates lower than they would otherwise be. The department received 810 comments on this proposal, 728 in opposition to restricting compensation. Very few comments were received on the other 50 proposals, and the majority of these responses supported initiatives identified.

"We will continue trying to find solutions which could help control the financial burden of insurance. The proposals in the consultation paper presented options for change. I have tried to facilitate debate and clarify issues without arguing for or against specific proposals. We will now finalize recommendations to be made for consideration by government. While some change can be made through regulation, most would require legislation. It is unlikely any legislative change would be dealt with prior to the fall sitting of the House of Assembly, except, perhaps, the proposal to appoint a consumer advocate. The responses received, and public discussion generally, indicate that only the restricted tort proposal has significant opposition.

"As part of our effort to determine what kind of consensus for change might exist, we commissioned two public opinion polls by Corporate Research Associates. The first, last November, indicated that 63 per cent of Newfoundlanders and Labradorians would prefer to limit what they could claim on automobile insurance, if it meant that rates would not rise. Thirty-one per cent preferred maintaining the current system even if it meant rates would increase. While that poll indicated the majority of people seem prepared to consider restrictions on claims to keep premiums stable, it did not identify specific restrictions which might be acceptable.

"In February 2002, a more definitive question was asked, outlining restrictions as stated in the consultation paper. This time, 58 per cent said they would prefer to maintain the current conditions for compensation, even if it would mean there would not be lower liability insurance premiums. Thirty-four per cent said they would prefer to limit compensation.

"Unfortunately, there has been a lot of inaccurate and misleading information distributed during the consultation process. Just yesterday, for instance, the Williams, Roebothan, McKay, Marshall law firm stated in an advertisement that "Ontario and Saskatchewan have no-fault insurance and are now trying to reverse it. So why does Minister Noel think it�s good for us?" The statement is untrue. The question is misleading.

The Coalition Against No-Fault Insurance was formed to campaign against the restricted tort proposal. However, the proposal they are opposing is not no-fault. The coalition stated that our per capita cost of automobile insurance is the lowest in the country at $308. In fact, our average policy cost is among the highest at $720 for the province and $850 for the Avalon region. The per capita average is low simply because we have fewer drivers per capita, and fewer high cost commercial policies.

"Some opponents feel it serves their purpose to characterize a restricted compensation system as "no-fault�. They argue that good drivers would end up paying for bad drivers, and that drivers causing accidents would not be held accountable for the injuries and damages they cause. That is simply untrue.

"While the paper has stimulated much good debate, it is unfortunate that some parties deliberately cloud some of the extremely important issues. The misleading information is probably largely responsible for the fact that we actually received 241 comments specifically directed towards no-fault, with 235 of those respondents disagreeing with a proposal which was never made.

"A restricted tort system would limit non-economic loss claims, but it is capable of making a significant difference in insurance rates. It has been adopted for about 70 per cent of all Canadians because it can contribute to keeping rates lower than they would otherwise be.

"The restricted tort proposal would see insurance compensation for non-economic claims paid only to people suffering injuries of a permanent and serious nature. All medical expenses, and any loss of income resulting from such injuries, would continue being covered as they are now. If such a proposal were adopted, it is estimated that liability premiums could be about 35 per cent lower than they would otherwise be. Such premium savings would be guaranteed and permanent because the potential claim cost reductions would be automatically factored into the Public Utilities Board rate setting process. However, whether the savings justify accepting restrictions on compensation is a legitimate question. As I have said many times, government will not consider adopting such a system unless people want it.

"Where do we stand now? Policyholders still face increasing premium costs creating difficulties for many individuals and families. And the insurance industry is projecting increases which will see rates rise almost 50 per cent over several years. This is a problem which will not disappear. We have to continue trying to find ways to deal with it.

"Government is taking action to improve highway safety and increase penalties for imprudent and careless driving, but research indicates these measures alone are unlikely to substantially curb insurance rates.

"Accident rates in the Avalon region are little different from the rest of the province, but premiums are much higher in the area because claim payments are almost twice as high. Why is that?

"Many people feel insurance companies could help by reducing repair costs and getting tougher with people seeking to abuse or defraud the system. While the industry claims to be doing the best it can, it has to do more. There is too much evidence of unnecessary payments being made. The industry contends that eliminating compensation for less serious injuries, many of which are considered questionable, is the only way to significantly control claim costs and premiums.

"Some lawyers contend there should not be any limitation on the right to compensation, in spite of the fact that a Supreme Court judgement itself imposed limits, and that 70 per cent of Canadians are now subject to such systems.

"Since significantly rising costs are a problem throughout the Atlantic provinces, I have invited the Atlantic ministers responsible for insurance to meet in St. John�s on March 22 to discuss the issue.

"I will also be holding a town hall on automobile insurance reform on March 12 at the Fairmont Hotel in St. John�s. Representatives of consumers, the insurance industry, the legal community, the Public Utilities Board, and my office will make brief presentations and respond to questions and comments from the public.

"In the end, policy holders pay the entire cost of automobile insurance. The most effective means of controlling prices is to minimize claim payments. We intend to do everything reasonable, and acceptable to citizens, to keep insurance costs affordable."

NOTE TO EDITORS:

A summary of responses received is attached to this news release.
Also attached is a copy of the CRA questions.

Media contact: Rick Callahan, Communications, (709) 729-4860.

2002 03 08                        2:00 p.m.