NLIS 1
May 12, 2005
(Government Services)
Government announces additional
auto insurance reforms
Government Services Minister Dianne Whalen today
announced additional auto insurance reform measures that will provide a further
overall five per cent reduction in premiums for many drivers, with far greater
savings for young drivers, while still retaining an injured person�s ability to
be compensated.
�Government has brought forward reforms that provide consumers with an average
overall savings of 20 per cent on their auto insurance premiums since August
2004,� Minister Whalen said. �We unveiled a comprehensive plan for reviewing and
reforming auto insurance in this province shortly after we took office. With
this announcement today, we are demonstrating that we have delivered on that
plan and on our commitments.�
Government will bring in legislation this session that will provide for the
elimination of rating based on age, gender and marital status; a further five
per cent reduction in premiums, unless companies can actuarially justify that
they can�t absorb the decrease; requirements by insurance companies to ensure
consumers are adequately informed of their rights when making a claim; group
rating, and a new process for setting rates.
These reforms are based on the outcome of the Public Utilities Board (PUB)
review and the department�s own review of several issues that were in addition
to that process. The elimination of rating based on age, gender and marital
status is a major issue for young drivers and their parents. It is estimated
that this measure alone will result in premium decreases of up to 46 per cent
for drivers under 25 in some cases.
�We mandate people to carry insurance and therefore it is incumbent upon
government to ensure consumers are treated fairly and that they have access to
coverage at reasonable rates. This is what we have achieved with our review and
our reforms,� Minister Whalen said.
In addition to the further reductions in premiums the reforms will provide for
certain groups and policy holders overall, the legislation gives affect to the
new process by which rates are set, which was announced by government in March
after public consultation. The new rate setting process requires individual
insurance companies to actuarially justify any rate increase to the PUB.
Companies will also be required to complete a Point of Claim Disclosure Form to
ensure that consumers are informed of their rights when making a claim.
�We wanted to ensure consumers are treated fairly by insurance companies in the
premiums they pay, and that they know their rights when making a claim or having
a claim made against them. This is what has been achieved through our
consultations with industry and consumers,� Minister Whalen said.
Government is confident that these additional measures are reasonable, given the
significant profits reported in the industry in recent years and the 10 to 12
per cent flexibility the PUB report indicates exists in the system to reduce
rates.
Government�s initial set of reforms, contained in Bill-30, came into effect
August 1, 2004 and provided consumers with an average overall savings of 15 per
cent on their premiums, depending on their coverage and where in the province
they live. The reforms included a $2,500 deductible on pain and suffering
claims.
The findings of the PUB review support government�s position that the savings
from a cap, which is the preferred direction of the insurance industry, are not
sufficient to justify the compensation restriction on injured parties. The
people of the province indicated they wanted to retain their ability to be
compensated for their injuries, which government has done.
Media contact: Tracy Barron, Communications, (709) 729-4860 or 690-6157
BACKGROUNDER
Government is legislating additional auto
insurance reform measures based on the outcome of the Public Utilities Board
(PUB) review and the department�s own review of several issues that were in
addition to that process.
Key reforms:
- elimination of age, gender and marital
status, and mandating that insurance companies can�t raise premiums of those
over 25 years of age as a result of this measure, unless it is actuarially
justified;
- mandated five per cent reduction of
premiums, unless insurance companies can actuarially justify to the PUB on
an individual basis that they can�t absorb it;
- permitting group rating, which will provide
lower rates to members of identified groups (i.e.: alumni associations);
- a new rate setting process based on
individual company filings where each company must justify any rate increase
to the PUB; and
- requiring insurance companies to complete a
Point of Claim Disclosure Form to be signed by consumers to ensure consumers
are adequately informed of their rights when making a claim. The form will
ensure that companies disclose:
- that federal law permits insurance
companies to conduct surveillance of injured parties making a claim
without their knowledge or consent;
- it is a Criminal Code offence to make a
false or inflated insurance claim, and that the claimant may be
prosecuted;
- an insurance company must advise a
policyholder of a third-party claim and the final amount paid out;
- an injured party can apply to court to
receive their claim settlement in periodic payments instead of a lump
sum; and
- an insurance company must settle a claim
as quickly as possible and, where fault has been determined, to make
interim payments until the final amount of the claim has been settled.
These changes are in addition to the auto
insurance reforms that came into effect August 1, 2004 that provided consumers
with overall average savings of 15 per cent on premiums.
Auto insurance was a key platform in the 2003 provincial election. Shortly after
taking office, this government unveiled a comprehensive plan for reviewing and
reforming auto insurance in the province. The plan included:
- a one-year freeze on auto insurance rates;
- a series of reforms, contained in Bill-30,
based on the savings an independent actuary indicated were immediately
available in the system;
- an updated study on the costs of the most
recent claims, and
- a review by the Public Utilities Board into
auto, homeowner, marine and commercial insurance.
Government�s initial auto insurance reform
package, Bill-30, was proclaimed into law August 1, 2004.
Key reforms:
- A nine per cent reduction in Third-Party
Liability premiums based on a $2,500 deductible on pain and suffering
claims, lost wages paid on 100 per cent of net wages instead of gross wages,
and elimination of double recovery of insurance claims.
- Mandated reductions on collision (27-37 per
cent), comprehensive (19 per cent), and uninsured motorist (11 per cent)
coverages, resulting in average premium reductions of about 15 per cent
(including the nine per cent reduction on liability).
- The introduction of new underwriting
guidelines used by insurance companies to determine rates and whether to
insure a person. An insurance company is no longer able to refuse coverage
or rate individuals solely based on:
- not at-fault accidents and claims;
- minor damage where no claim is paid;
- NSF cheques;
- another company refusing to insure the
individual;
- lapse in coverage (unless the lapse is
caused by a policy cancellation for failing to make payments; failing to
disclose a conviction or claim that would cause a higher premium to be
charged, or a driver�s licence suspension for driving with no
insurance).
- A company can no longer refuse coverage
based on:
- age, gender or marital status;
- age of vehicle (may request an
inspection after eight years);
- not having other policies with the
company, known as tied selling;
- the individual currently being in
Facility Association.
- Claimants will have a 25 per cent reduction
in their compensation for not wearing a seatbelt.
- Drivers may now legally exclude anyone from
coverage. This includes parents wanting to exclude driving-age children from
their policy.
- Other consumer protection measures,
including mandatory monthly payment plans and interim claims payments until
the amount is settled.
- Disclosure to drivers placed in Facility
Association to ensure they are fully aware that they are in Facility
Association and why.
View Minister�s Speaking Notes
View Frequently Asked Questions
2005 05 12
9:55 a.m.
|