NLIS 2 December 17, 2002 (Government Services and Lands) Minister explains automobile insurance reform bill Walter Noel, Minister of Government Services and Lands, today outlined the details of Bill 28, an act to amend the Automobile Insurance Act, the Insurance Companies Act, and the Highway Traffic Act. The minister said Bill 28 would bring about significant improvements in our automobile insurance system and spoke about government�s continuing efforts to help make driving safe and affordable. "Bill 28 responds to issues arising out of the automobile insurance reform consultation process I began last year, and the work of a House of Assembly Select Committee. It proposes legislative changes dealing with, among other things, underwriting guidelines, tied selling, protection for unearned premiums, minimum capital requirements and benchmarks established by the Public Utilities Board. This is one of four bills presented to the House of Assembly this year embodying government�s efforts to make driving as safe and affordable as possible. "Bill 15 proposes a ban on the use of hand held cell phones by drivers while driving, and Bill 20 would provide greater penalties for impaired driving. They are expected to be passed this week. Bill 9, authorizing the appointment of the advocate to represent consumers at automobile insurance rate hearings, has already been given Royal Assent. "There has been considerable public discussion of the initiatives provided for in Bill 28, particularly as insurance becomes more difficult to obtain and costs rise. People want good insurance coverage, but they also want reasonable premium prices, respectful treatment by insurance companies, and diligent efforts by all parties to minimize costs and abuse. Citizens want the insurance industry to be more open, communicative and transparent. Bill 28 provides for that. "While Bill 28 may not get third reading this session, I want to outline its provisions, make the public aware of the changes that are coming, and speak about our broader efforts. "Government is taking significant actions to promote driving safety, but the only way to reduce premium prices dramatically is to reduce the cost of claims. A meaningful difference is only likely to occur in the short term if restrictions are accepted on claims, particularly in the area of minor, often questionable, soft tissue claims. "Because there has been strong opposition to restricted compensation for minor pain and suffering, I am not prepared to recommend that restrictions be implemented at this time. "However, about half of all Newfoundlanders and Labradorians appear to believe there should be an option to purchase restricted coverage. A recent Corporate Research Associates poll found 50 per cent of respondents are in agreement with the statement: Insurance coverage for pain and suffering should be optional, allowing drivers to choose whether or not to pay extra for this coverage. "We have carried out preliminary research on choice systems in North America, which we have made public. If there is sufficient interest, I will recommend that government commit the resources necessary to undertake a detailed analysis to determine if such a system is feasible for our province." Under a choice system, a driver buying insurance has a choice between receiving compensation for non-economic loss (pain and suffering) for less serious injuries or having restrictions on such compensation. Restrictions on non-economic loss compensation usually apply only to the driver choosing this option and his/her immediate family living in the same household. A driver choosing to have restrictions on compensation for non-economic loss pays less for insurance than a driver who chooses not to have restrictions. Pennsylvania implemented a choice automobile insurance system 12 years ago. Initially 75 per cent chose full compensation and 25 per cent chose restricted compensation. Currently 55 per cent have full coverage and 45 per cent have restricted coverage. Liability insurance premiums are about 40 per cent less for restricted coverage. Minister Noel said: "If consumers are interested in a choice system, we can look at the various options available." Next month, the minister plans to hold information forums to discuss various insurance related issues. He will invite representatives from the insurance industry, regulators, and other interest groups to participate. The forums will operate somewhat like town halls, and the public will have opportunities to ask questions and make comments. The topics to be discussed will include automobile insurance reform; choice automobile insurance systems; homeowners insurance, particularly availability and cost of insurance in downtown St. John�s; implementation of government�s home oil storage tank regulations and its affect on insurance; the exclusion of fire after terrorism by some insurance companies; and availability and cost of commercial insurance, particularly liability coverage. Minister Noel said: "We are doing everything reasonable to help consumers deal with volatile insurance issues, and to make driving as safe and affordable as possible. We encourage citizens to work with us in trying to make improvements. We have to make sure our insurance system is as competitive and efficient as possible, remembering always that consumers pay the entire cost of providing insurance. The cost of claims has to be controlled in order to control the cost of policies." Media contact: Rick Callahan, Director of Communications, (709) 729-4860
Backgrounder Underwriting Guidelines
Facility Association
Unearned Premiums All property and casualty insurers operating in the province required to be a member of a compensation corporation and in the event of the failure of an insurance company, coverage for unearned premiums be increased to 100 per cent up to a maximum of $5,000. Monthly Premium Plan All insurers with 5,000 or more auto policies in the province to provide a monthly premium payment plan with a maximum interest rate of 3% of the total premium payable. Tort Reform
Claims, Adjusting and Appraisal Practices
Rate Regulation
Capital Requirements Capital requirements for new insurance companies incorporated in the province increased to $3 million. Highway Traffic Act
Brokers� Disclosure to Consumers Brokers to disclose to applicants the companies they represent, from whom they requested a quote, and the amount of the quote, if requested by the consumer. Consumer Education
2002 12 17 10:40 a.m. |
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