Government Services
February 16, 2007

Province Recognized for One of the Lowest Auto Insurance Premiums in the Country

Newfoundland and Labrador has one of the lowest average premiums for auto insurance. This is consistent with the Williams Government Blueprint commitment to lower auto insurance rates when it took office in 2003. The Honourable Dianne Whalen, Minister of Government Services, says that she was extremely pleased with the recognition that this province has the third lowest auto insurance premium in the country and one of the largest decreases in rates as well. This was published in the report, The False Promise of Government Auto Insurance, by the Fraser Institute which was released yesterday.

"Auto insurance reform was a key platform for this Provincial Government. We heard over and over from consumers that their premiums were too high and we listened to them," said Minister Whalen. "We asked the Public Utilities Board to review auto insurance rates and saw significant reforms introduced in 2004 and 2005. These reforms resulted in consumers saving up to 20 per cent. The Fraser Institute�s report reaffirms that our reforms were in the best interest of consumers. It is rewarding when we see that consumers in this province are paying on average $947 as compared to almost $1,500 in other provinces."

Key reforms introduced in 2004 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 without significantly reducing benefits to injured parties. The reforms included a $2,500 deductible on pain and suffering claims. In 2005, government introduced further reforms to include an additional five per cent reduction in premiums and the elimination of rating based on age, gender and marital status. Additional reforms included regulations of underwriting guidelines, a new rate setting process and a new requirement for insurance companies to complete a Point of Claim Disclosure Form which ensures that consumers are fully aware of their rights when they are making a claim.

In addition, the participation rate for Facility Association has gone down from a peak of eight per cent in September 2003 to a current rate of less than three per cent. Facility Association is an association funded by all automobile insurers in each of the jurisdictions in which it operates. It ensures that drivers unable to obtain insurance with an individual company are able to obtain the coverage they need to legally operate their vehicles. This decline means some 10,000 Newfoundlanders and Labradorians have been able to obtain insurance in the regular marketplace representing a significant reduction in their premiums.

"Since we first introduced these reforms, we have heard from many consumers who have been pleased with the reductions they have seen in their premiums," said Minister Whalen. "Insurance is an issue which we took seriously and it is always rewarding when we hear that consumers feel that they are being treated fairer."

Government continues to take steps in this area. To that end, the department recently released the Principles for the Sale of Insurance which aims to educate consumers about their options. Insurance companies and brokers are obliged to provide this consumer protection document to consumers so that they can make informed decisions about their insurance purchase.

This consumer protection document was a result of the Public Utilities Report on homeowner, marine and commercial insurance. The Department of Government Services is currently working with a number of groups including the volunteer sector and the insurance industry to determine next steps government should take to address concerns in those areas.

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Media contact:

Vanessa Colman-Sadd
Director of Communications
Department of Government Services
709-729-4860, 682-6593



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 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.
  • 2007 02 16 10:10 a.m.


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