Hearings resume to tackle N.L. auto woes

HEARINGS have resumed into Newfoundland and Labrador’s beleaguered auto insurance system.

The province’s public utilities board is holding the hearings that began in June and were postponed later that month for the summer.

Insurers are calling for significant changes to combat escalating claims costs and unsustainable returns.

In a letter to members of province’s house of assembly this summer, the Insurance Bureau of Canada said Newfoundland has fewer companies offering auto insurance than any other province, but that isn’t the only problem.

The top four auto insurance groups that insure private passenger vehicles in Newfoundland make up 85% of the market, the IBC said.

In the other three Atlantic provinces, the top four make up 50% and in the rest of Canada the figure is 55%.

Furthermore, the IBC said, Newfoundland private passenger vehicle insurers have had an average return on equity of -6.8% over the past five years, the worst in Canada.

“Once insurers pay provincial and municipal taxes, broker fees or agent salaries, building costs and other operational fees, auto insurance is a losing proposition,” IBC Atlantic vp Amanda Dean wrote in the bureau’s letter.

“This was recently confirmed by Oliver Wyman, an actuarial firm hired by the government to research the industry’s profit and loss.”

She said the insurers who are left standing in the province are trying to hang on in order to serve their customers. “To be honest, the industry fully recognizes that this fact means nothing to drivers — nor should it. “However, the impact of that fact is felt by everyone who drives within the province. The good news is that there is a pressure release valve to this problem.”

The IBC is calling for changes in four areas. The first is the implementation of a minor injury damages cap of $5,000, with annual inflation adjustments and a definition of minor injury that reflects the prevailing medical literature.

“These are injuries that resolve within days, weeks or months,” the IBC said. “Additionally, the amount of the cap is over and above lost wages and medical bills. Features of this recommendation have already been implemented elsewhere in Canada.” The bureau is also recommending enhanced accident benefits. “To bring Newfoundland in line with neighbouring provinces, we suggest making accident benefits mandatory and increasing the benefit amounts to match (theirs). We are also suggesting to establish pre-approved, evidence-based treatment protocols for minor injuries which would see people begin treatment quickly.”

The IBC also wants to make it easier to repair and replace damaged vehicles. It said a direct compensation property damage model would mean that regardless of who is at fault, the customer’s insurer would repair their vehicle in a collision.

For rating purposes, fault would still be assigned to the at-fault party. And the bureau is also calling for a change to the rate regulation process to make it quicker and less costly.

(More coverage of the Newfoundland auto insurance debate is presented in the Sept. 10 weekly edition of Thompson’s. To subscribe, please choose the ‘Subscribe’ tab on our main page or email mpub@rogers.com for more info).