NLIS 6
October 21, 2005
(Government Services)
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. |