Minister says auto insurance study misleading

Dianne Whalen, Minister of Government Services, says she finds the recent study released by the Consumers� Association of Canada to be very disappointing and serves only to confuse the public. The study claims that auto insurance rates in Atlantic Canada are higher than provinces in Western Canada.

�My officials within the Consumer Affairs Division have looked at this study as it has been presented and have found it extremely misleading,� said Minister Whalen. �There are a number of areas in this study which raise questions but do not provide credible answers for them. For instance, we have no idea for what period of time that this study was conducted. The Government of Newfoundland and Labrador has introduced a number of auto insurance reforms since August 2004 and we simply do not know if this study takes this into account.�

The study also makes the claim that the Government of Newfoundland and Labrador legislated caps on payments to victims of auto crashes. In actuality, this government achieved savings for consumers by putting in place a $2,500 deductible on claims for pain and suffering.

�I find it ironic that the member for Carbonear-Harbour Grace stated in the media yesterday that our plan should be scrapped and the Opposition plan put in place. Mr. Sweeney, while he was minister, did nothing to reform auto insurance and reduce rates. The previous administration�s plan provided no compensation for pain and suffering for basic coverage. Their plan would have forced consumers to pay extra for that coverage. When we conducted consultations on auto insurance, consumers told us that they wanted the right to sue for pain and suffering. We listened to them,� said the minister.

Since August 2004, the Government of Newfoundland and Labrador has introduced reforms which have brought savings averaging 20 per cent to consumers. Most recently, this government has eliminated rating based on age, gender and marital status.

�We have no way to tell if these latest measures were taken into account when this study was developed. The study certainly gives the impression that this is the practice in this province which is not the case. We have also found some very strange comparisons in this study,� stated Minister Whalen.

For instance in the association�s findings, they compare insurance rates for medium-sized cities namely Victoria, BC; Moose Jaw, SK; Brandon, MB; Moncton, NB; Sydney, NS and Foxtrap, NL.

�I have to question why the Consumers� Association of Canada would choose to use Foxtrap when it is not a city and in fact makes up a part of the Town of Conception Bay South. It is evident that the association did not research this fact closely enough. The methodology of this report leads consumers to believe that the association utilized over 25,000 quotes from Newfoundland and Labrador for their study. We would certainly like to see those details,� said Minister Whalen.

The study further misinforms consumers by comparing rates in the various provinces in which coverage can be quite different. For example, injured persons in Manitoba and Saskatchewan get no compensation for pain and suffering while injured parties get significant compensation for such injuries in this province.

�When there so many significant oversights in the Consumers� Association of Canada�s study, it brings into question what other oversights there may be. The Consumers� Association of Canada must be held accountable for their research, methodology and conclusions in this study,� concluded Minister Whalen.

Media contact: Vanessa Colman-Sadd, Communications, (709) 729-4860, 682-6593

BACKGROUNDER

Government legislated additional auto insurance reform measures as of August 1, 2005 based on the outcome of the Public Utilities Board (PUB) review and the departments 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 cant 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 cant absorb it;
• Permitting group rating, which will provide lower rates to members of identified groups (ie: 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.

2005 10 21                          11:00 a.m.