Hon. Dianne Whalen
Minister of Government Services
Better Business Bureau Annual General Meeting and Luncheon� June 8, 2005
Check Against Delivery

Good afternoon and thank you for the invitation here today. I was told I could speak on the topic of my choice.

I appreciate this opportunity to address the issue that generates the most consumer calls to the Commercial and Consumer Affairs Branch auto insurance.

Seventy-five per cent of consumer calls and complaints to the department relate to issues around auto insurance.

Before we brought in Bill 30 last August, the majority of questions were around how consumers were rated, how claims were settled and how these claims affected people�s premiums.

Since the introduction of our first series of reforms, the majority of inquiries now relate to how these reforms affect consumers.

Auto insurance has been the single most important consumer issue in the last several years. If you remember, it was a huge issue going into the last provincial election.

It was a consumer issue that we took very seriously, and one that we committed to addressing. One of our main priorities after taking office was to give consumers relief from the rising cost of auto insurance.

Within the first five months in office, this government announced a series of auto insurance reforms, and rolled out a comprehensive plan to address insurance issues in this province.

Over the past year, we have delivered on that plan.

We committed to providing consumers with access to adequate coverage at reasonable rates, and we have done that.

I want to take this opportunity to outline the merits of the reforms that we have brought forward.

Our first step was to freeze auto insurance rates for one year, and to direct the Public Utilities Board to undertake several studies and a public review process into other possible reform options.

At that time, we brought forward a series of initial auto insurance reforms that have provided consumers with an average overall savings of 15 per cent, depending on their coverage and where in the province they live.


These reforms are saving consumers 25-million dollars a year in premiums. This is money they now have to spend on other things.

We were able to mandate a reduction of nine per cent on third-party liability premiums by bringing in a $2,500-deductible on pain and suffering claims, as well as basing lost income on net wages instead of gross, and by eliminating double recovery from more than one insurance policy.

Claimants should be compensated based on their net take home pay, not the amount before deductions.

We also believe a claimant shouldnt earn more income from being off work due to an accident than if they were working.

These types of reforms return the auto insurance system back to what it was originally intended to do.

Insurance should fairly compensate people for their injuries and lost income.

We also legislated reductions of 27 to 37 per cent for collision coverage; 19 per cent for comprehensive, and 11 per cent for uninsured motorist. These combine with the nine per cent reduction on third-party liability for an overall average savings of 15 per cent.

That first step in the reform process gave consumers immediate relief from the high cost of insurance, based on the savings an independent actuary indicated could be achieved.

We believe consumers are being treated more fairly as a result of Bill 30 and the new rules on how insurance companies can set rates and refuse coverage.

I am very proud as a minister to have been able to bring these reforms forward in the best interest of consumers.

With the introduction of the new underwriting guidelines, individuals can no longer be refused coverage or rated solely based on accidents that are not their fault; minor damage accidents where no claim is paid; writing an NSF cheque; another company refusing to insure them, or lapse in coverage, except in certain instances.

As well, consumers can no longer be refused coverage based on their age, gender or marital status; the age of their vehicle; not having other policies with the company, or the individual currently being in Facility Association.

Im sure any parents of teenagers are relieved that you can now exclude driving-age children from your policy. This is an important option for parents whose driving-age children do not drive their vehicle, yet they still had to pay a higher premium because that child lived under their roof. We did not think that was fair.

We also felt it only fair to address a totally preventable problem that can contribute to the cost of a claim people not buckling up. Claimants will have a 25 per cent reduction in compensation if they were not wearing a seatbelt, unless they can demonstrate that not buckling up did not contribute to their injuries.

We feel it is important to encourage people to wear their seatbelts, which reduces the severity of injuries in the event of an accident and therefore the costs to the system.

The initial package of reforms provided savings to consumers on their premiums, while at the same time preserving an injured persons ability to be compensated. The people of the province indicated that this was important to them, and we listened.

Last month, I announced the additional reforms we are implementing as part of this government�s auto insurance reform plan.

We are providing a further overall five per cent reduction in premiums for many drivers, as well as significant reductions in rates for young drivers.

This means consumers will realize a total average overall savings of 20 per cent on their auto insurance premiums as a result of the measures taken by this government since August of last year.

We are mandating that companies reduce premiums by a further five per cent as of August 1st, 2005, unless a company can justify to the Board that they can�t afford the further reduction.

The additional savings will be credited on consumers� next policy, or refunded upon cancellation of the policy.

We are eliminating rating based on age, gender and marital status. This means drivers under 25 will achieve far greater savings, in some cases as much as 46 per cent. This a major issue for young drivers and their parents. Under existing rates, some young drivers literally cant afford to drive.

A third of all consumer responses during the review process pertained to this issue.

As a government, we agree that it isnt fair to the 85 per cent of young drivers who do not have accidents, to have to pay huge premiums for the 15 per cent who do.

Premiums should be based on your driving record. This is what we are attempting to achieve.

At the same time, we are also ensuring that insurance companies do not raise rates for drivers over age 25 as a result of this measure. Any rate increases will have to be justified to the Board.

From a consumer protection perspective, we are putting in place requirements for insurance companies to follow to ensure consumers are informed of their rights and responsibilities when making a claim.

To this end, insurance companies will have to complete a Point of Claims Disclosure form to be signed by the claimant when making a claim.

This form will ensure that claimants know that they may be placed under surveillance without their knowledge or consent. We consulted on this issue and we feel this balances privacy concerns without defeating the purpose of surveillance.

Federal law allows insurance companies to put claimants under surveillance. What we are doing is informing claimants of this possibility, while at the same time ensuring the purpose of this activity is upheld.

This form will also ensure that anyone making a claim is fully aware that it is a Criminal offence to make a false claim or to inflate a claim, and that they can be prosecuted.

It will ensure that insurance companies advise policyholders of third-party claims made against their policy, and the final amount paid out.

It will ensure injured parties are told they can apply to court to receive their claim in periodic payments instead of a lump sum.

It will ensure that claimants are told that the insurance company must settle the 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.

We are also now moving to permit group rating, which will provide lower rates to members of identified groups, such as unions and alumni associations.

The Board report indicates general support for this type of rating and that it will provide additional savings of between five and 15 per cent for some drivers.

Finally, we are moving to a new rate setting process based on individual company filings. Each company will now have to justify any rate increases to the Board.

The current process uses minimum and maximum benchmarks in setting rates, with requests for rate increases within the benchmarks being automatically approved. We believe companies should have to individually justify any increases.

As a government, we mandate people to carry insurance and therefore it is incumbent upon us to ensure consumers are treated fairly, and that they have access to coverage at reasonable rates.

This is what we set out to achieve with our reviews, and this is exactly what we have achieved with our reforms.

We are glad the insurance companies worked with us through our review process. It was always our preference to work with private companies within the existing system to improve accessibility and affordability for consumers.

Industry came to the table and lobbied for a cap on pain and suffering claims, as opposed to the $2,500-deductible we brought forward last August. We chose a deductible over a cap to provide savings for consumers on their premiums, while still retaining an injured partys ability to be compensated for their injuries.

At the same time, we ensured that the Board review included a cap versus a deductible.

The evidence out of that review supports governments position that the savings from a cap are not sufficient enough to justify the compensation restriction on injured parties.

We have achieved an average overall savings of 20 per cent while still retaining that access to compensation. We believe this is in the best interest of consumers. It is also what consumers want.

With these latest reforms, we are taking a proactive approach to ensure that rates do indeed come down by the amount the Board says is in the system. The insurance industry took part in this process, and their views and profitability were part of the review submitted to government.

We are being reasonable with these reforms, given the significant profits being reported in the insurance industry and the room the Board says exists for rates to come down.

We understand that not all companies have the same profit margin, which is why we are legislating reductions of five per cent, unless a company can go to the Board and justify otherwise.

We are legislating these reforms in the best interest of consumers in this province.

The NDP and their supporters have aggressively promoted a public insurance system. Our preference has always been to work with industry to improve the current system to ensure consumers have access to insurance that is affordable and fair. We believe we have done that.

At the same time, we are waiting for the outcome of the Board review of homeowner, marine and commercial insurance before deciding whether to do a detailed analysis of a public system. This type of analysis could be quite costly.

I want to thank you for the opportunity to go over these important consumer measures, and to explain our reasoning behind bringing them forward. Thank you.