A burdensome rate regulation process implemented in 2004 in response to a market crisis has been blamed in part for significant auto insurance rate increase applications in New Brunswick.

Amanda Dean, Atlantic VP at the Insurance Bureau of Canada, said that in the last four years the industry experienced significant losses and their return on equity deteriorated from -7.3% in 2016 to -13% in 2018.

“When you have years of those losses, and the fact that in 2018 for every dollar insurers earned in auto premium they paid out $1.17, insurers are not covering operating costs,” Ms. Dean told Thompson’s.

“This is unsustainable and a lot of focus for consumers, as there should be, is about these recent increases being unsustainable but the next logical thing is to look at what is driving this.”

She said one of the main issues is the way the rate regulation system is set up.

The provincial government established the New Brunswick Insurance Board in 2004 to regulate auto insurance rates. And the Insurance Act requires that insurers file their proposed rates at least once every 12 months and the board, staff and government actuaries review the filings to ensure the proposed rates are just and reasonable.

If a rate request is above 3%, a public hearing is required.
Ms. Dean said it is not a coincidence that 2.99% rate requests are common.

“With filings over 3%, insurers have to go through a lengthy and costly hearing process,” she said.

“Because of the cost, insurers want to make sure participating will be worth it and are probably going to wait to ask what they need because of the cost of the hearing process.”

As reported in Thompson’s (Sept. 16 weekly edition), several insurers have applied for double-digit auto rate hikes this time around.

Robert E. Kimball, president of the Insurance Brokers Association of New Brunswick, said that after two years of rising auto insurance premiums in New Brunswick, brokers there have gained considerable experience in having difficult conversations with customers.

“We have seen rates start to creep up over the past couple of years with some more significant rate increases over the past year and possibly or likely more to come,” said Mr. Kimball, commercial manager of Pearsons Insurance in Sussex, N.B.

He said having to sell a product with continually rising prices is not an easy task but brokers are framing the conversation from an education standpoint.

“Brokers have been doing an increasingly better job of educating consumers and taking the time to talk to them about why rates are increasing and what they may be able to do to avoid (or decrease) increases and claims in some cases,” Mr. Kimball said.

He said insurers are saying the primary reason for the rise in premiums is increase in claims costs and frequency.

At least one insurer is emphasizing the importance of working with an insurance broker to find suitable insurance products.

“We don’t take lightly the impact of rising premiums on our customers and encourage people to work with their independent insurance broker to make sure they have the insurance that is right for them,” said Wawanesa Insurance spokesperson Brad Hartle.

The Winnipeg-based insurer recently filed for an 8.6% auto insurance premium increase in the province.

Mr. Hartle said increasing claims costs, more distracted driving and severe weather are the primary drivers for rising claims costs.

Echelon Insurance also cited increase in claims costs as a major factor for its 30% increase application.

“Echelon is focused on ensuring the sustainability of our high-risk automobile product so that we can continue to protect Atlantic Canadians,” said Robin Joshua, Echelon Insurance president.

“While we are mindful of the impacts of rising rates on our consumers, this is the first significant increase that Echelon has proposed in the past decade.”

Sonnet Insurance has applied for a 50% rate hike, the Insurance Co. of Prince Edward Island is looking for 25% increase, Economical Insurance has filed for an increase of 11.9% and Aviva Canada is seeking a 9.31% hike. Michèle Pelletier, New Brunswick’s consumer advocate for insurance, said she believes some of the requests are “very unreasonable.”

(For more independent coverage of N.B. auto rates and other Canadian p&c industry news, please choose the ‘Subscribe’ tab on our main page or email mpub@rogers.com for more information).