Insurance industry unhappy with government proposal

Government Services and Lands Minister Walter Noel said today that he was disappointed to learn the Property and Casualty Insurance Compensation Corporation (PACICC) may withdraw its compensation plans from the province if government proceeds with one of the proposals in its automobile insurance consultation paper. That proposal is to compensate consumers for 100 per cent of unearned premiums, up to a maximum of $5,000, in the event of the failure of an insurance company. PACICC is the industry organization that provides compensation when an insurance company goes out of business.

Minister Noel said: "This proposal is a very important consumer protection initiative. I am surprised by the industry�s action."

"When Hiland Insurance went out of business in the mid-1990s, consumers lost approximately $5 million in unearned premiums. After that, our superintendent, in cooperation with superintendents in other provinces, approached PACICC to cover unearned premiums. PACICC eventually agreed to cover 70 per cent of unearned premiums up to a maximum payout of $700. Under this plan, if an insurance company goes out of business, with $5 million in unearned premiums, consumers would end up losing $1.5 million. Under the proposal in the consultation paper, consumers would be fully protected, if a premium was less than $5,000.

Minister Noel has directed his officials to review the consequences of this action and to determine what steps may be taken in response to it.

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

2002 03 12                          4:25 p.m.