Statement by the Hon. Bradley Green Q.C.
Minister of Justice and Attorney General
Mr. Speaker:
I am pleased to rise today in the House to set out this government’s automobile insurance reform plan.
Our plan is a comprehensive plan which includes over eighteen specific initiatives designed to bring more fair, accessible, and affordable automobile insurance to New Brunswickers.
As you will recall, this government called on the Legislative Assembly to create a Select Committee on Automobile Insurance and asked the Select Committee to bring forward recommendations to address the issues of fairness, accessibility and affordability of automobile insurance in New Brunswick. That report was tabled in this House last Fall.
Mr. Speaker, we have not only taken the time to carefully review the recommendations contained in the Committee’s report, but we have also carefully listened to the people of New Brunswick who are ultimately affected by the rising cost of automobile insurance premiums.
While the report contained a number of recommendations, which I have previously stated were a good step, it became obvious that more needed to be done to meet the expectations of New Brunswickers and protect them against the type of increases we have seen over the past year or two, and ensure that people have access to automobile insurance wherever they live in this province.
Today, Mr. Speaker, I am pleased to tell New Brunswickers that we have listened to them. Our plan incorporates several of the Committee’s recommendations and we have gone further than recommended by the Committee to ensure that New Brunswickers will have fair, accessible and affordable automobile insurance in this Province.
Guiding Principles
Mr. Speaker, our automobile insurance reform plan is based on three core principles that have guided our actions at each step of the way:
First, fairness. Automobile insurance in New Brunswick must be fair to consumers. New Brunswickers must not be subjected to unfair industry practices or unjust underwriting guidelines that prevent them from obtaining the insurance coverage they need. These unfair practices must end and they must end now.
Second, accessibility. Automobile insurance in New Brunswick must be more widely accessible to consumers no matter where they live in our province. New Brunswickers must not be prevented from getting the insurance they need simply because of where they live or a lack of choice.
Third, affordability. Automobile insurance in New Brunswick must become more affordable to consumers with greater rate stability than we have experienced over the past year. New Brunswickers need to drive; and since insurance is mandatory, they need affordable automobile insurance to allow them to do so. Automobile insurance rates must become more stable and affordable than has been the case.
The reform plan we are announcing today is reasonable and comprehensive. It takes concrete steps to address each of these three core principles: fairness, accessibility, and affordability. It is simply not possible to address one without the other. A simple, single solution doesn’t exist and frankly, wouldn’t work.
The evidence presented to the Select Committee clearly established that the reasons behind escalating automobile insurance rates were not restricted to New Brunswick alone. One simply needs to examine neighboring provinces, such as Nova Scotia, Newfoundland, and PEI, to realize that this is a national phenomenon and that New Brunswick is not the only province which has to deal with the issue of rising automobile insurance rates and unfair insurance practices.
While we are not able, obviously, to solve this nation-wide problem, we are in a position to take measures within our own jurisdiction to address it. We are not prepared to accept the status quo and do nothing. We are not prepared to wait for the market to “fix” itself. We are not prepared to cater to the wishes of industry or any other special interest groups at the expense of New Brunswick drivers and taxpayers.
Automobile insurance rates have risen too far, too fast. New Brunswickers are concerned and we are too. Rates must stabilize and become more predictable and affordable.
That’s why we are acting today in the best interests of all New Brunswickers and, if necessary, we will act further in the future.
Alternatives Considered
As we developed our reform plan, the government considered a range of options to ensure the most reasonable, effective solution for New Brunswickers. Two options which are not on the table today are: a government run, public insurance system and a full no fault insurance system. Neither was recommended by the Select Committee and neither will be recommended by the government.
Both of these options would involve dramatic upheaval in our private automobile insurance system. They would affect not just drivers and taxpayers, but many small business persons throughout the province who sell insurance and provide services to accident victims. Replacing the private sector with a government-run insurance system would require an expensive new bureaucracy, and could potentially eliminate many small businesses such as brokers. A government-run system would involve a trade-off between less coverage and lower rates. A trade-off paid for by the accident victims themselves.
Furthermore, under international trade agreements such as GATT and NAFTA, the provincial government could be liable to compensate insurance companies for tens of millions of dollars in lost revenues by taking this business over from the private sector.
A full, no-fault insurance system, either publicly-run or privately-run, would eliminate the victim’s right to sue the person at fault and would also eliminate a victim’s right to recover any amount for pain and suffering. Additionally, it would severely restrict the victim’s right to be fully compensated for his or her economic losses, such as loss of income. More money for insurance companies and less benefits to consumers does not strike us as a sound foundation for a new auto insurance system in our province.
Mr. Speaker, a more reasonable and balanced approach that is comprehensive and effective is required. One that builds on the current legal system that protects accident victims’ rights, while taking strong new steps to regulate the insurance industry in New Brunswick to ensure more fair, accessible, and affordable automobile insurance for New Brunswickers. That is the plan we are putting in place today.
Auto Insurance Reform Plan - Summary
Mr. Speaker, I would now like to summarize the key initiatives of our reform plan to make automobile insurance more fair, accessible, and affordable to New Brunswickers:
First, we will strengthen the public review of automobile insurance by creating a new Automobile Insurance Review Panel as part of the Public Utilities Board. Its mandate will be to review and approve future rate increases, monitor insurance issues affecting both companies and consumers, and undertake analysis and collect accurate statistics on accidents, claims, and industry performance. To ensure an independent, public interest assessment of the automobile insurance market in New Brunswick.
Second, we will regulate future rate increases. Any rate increase over 3 per cent during any 12-month period will now have to be reviewed and approved by the new Automobile Insurance Review Panel to determine if it is justified. Insurers will be required to appear before the Panel to justify their proposed increases. Insurers will also be required to file their rates at least once every twelve months for review. Any insurer that files a new rate more than twice in any twelve-month period will now be subject to a mandatory investigation by the Panel.
Third, to prevent discrimination against consumers, we will regulate insurance company underwriting practices to prohibit insurers from either refusing to insure a person, from canceling, or refusing to renew a person’s existing automobile insurance policy based on a comprehensive range of grounds.
Fourth, we will address minor personal injury claims – one of the most recognized cost drivers of rising automobile insurance rates - by instituting a limited, but targeted capping of non economic losses, such as pain and suffering awards, in insurance claims for soft tissue injuries and other non-permanent personal injuries.
Fifth, we will preserve the right of accident victims to recover their economic and non-economic damages for major injuries. No new limits are being placed on recovery for damages for either economic or non-economic loss.
There will be no changes to the fault or tort system in the Province. In other words, we will preserve our current system which allows a victim to bring an action against the person at fault to recover his or her damages. This is a good system that serves New Brunswickers well. It needs to be improved, not eliminated.
Sixth, we will strengthen the role of the Department of Justice in providing useful consumer information and guidance to consumers on automobile insurance issues so New Brunswickers can better understand and make more informed choices about insurance.
Seventh, we will remove restrictions that prevent regular market insurers from offering group rates for automobile insurance in order to provide more competitive choice in insurance offerings.
Eighth, we will stimulate competition by examining whether caisse populaires and credit unions can sell their own automobile insurance products and services in the markets they serve.
Ninth, we will remove the restriction which currently prevents insurance companies from rating Third Party Liability in the current territories which exist in this province. By allowing Automobile Insurers to further rate Third Party Liability, or Section A coverage, this will encourage companies to market their products in all parts of this Province. As a further step to promote accessibility and affordability through competition, we will ask the new Automobile Insurance Review Panel to undertake an immediate study of the territorial rating system and to determine the benefits of allowing Insurance Companies to establish their own territories. Such a review is consistent with the recommendation of the Select Committee.
Tenth, we will respond to the full range of specific recommendations of the Select Committee detailing additional actions to make automobile insurance more fair, accessible, and affordable.
Auto Insurance Reform Plan - Details
I would now like to detail the specific, new initiatives we are implementing under each of our guiding principles of fairness, accessibility, and affordability.
Fair Automobile Insurance
Mr. Speaker, to make automobile insurance more fair to New Brunswickers, the government is undertaking four specific initiatives:
First, we will amend the Insurance Act to allow for strong, new regulations to prohibit unacceptable underwriting practices. Specifically, insurers will be prohibited from refusing to insure a person, and from canceling or refusing to renew a person’s existing automobile insurance policy on the basis of any of the following eight specific grounds or any combination:
- age of the person
- age of the vehicle
- past claims under the policy for which the person was not at fault
- missing one premium payment
- a lapse in coverage
- the fact that a person insured under a group plan has left the group
- the fact that a person has been refused coverage by another insurer or had an other insurer decide not to renew her coverage, or
- the fact that a person is or has been insured by the Facility Association.
Insurance should be based on legitimate risk factors, not grounds that are unfair or could even be discriminatory. This will help protect New Brunswickers, including youth and seniors.
Second, the use of accident fault charts as an expedient method of determining fault has been seen by some as unfair. The Select Committee recommended a review of this industry practice. The Superintendent of Insurance has therefore been directed to review with industry the use of fault charts and the disclosure of fault determinations.
Third, the issue of appropriate benefits for accident victims under Section B of the Standard Insurance Policy also speaks to fairness and was raised by the Select Committee. We concur with their recommendation that benefits need to be as appropriate as possible, although we must be aware of any possible impact on insurance premiums to pay for expanded benefits.
The government will work with stakeholders to assess the possible expansion of benefits while being mindful of the possible impact on rates.
Fourth, greater consumer information would help many people make more informed automobile insurance choices. Government can act as an effective consumer advocate in helping prepare and publish such information. Accordingly, the Department of Justice will begin to develop and publish useful, informative, consumer-friendly information that will help consumers be more aware of their choices, and the questions they should ask when purchasing automobile insurance.
Accessible Automobile Insurance
Mr. Speaker, to make automobile insurance more accessible to New Brunswickers, the government will undertake three specific initiatives:
First, as I have stated, the government will remove the restriction which prevents insurance companies from rating Third Party Liability in the current territories which exist in this Province. Every other province but New Brunswick allows for this approach. There are currently four distinct territories in the Province.Automobile Insurers are presently allowed to rate the other components of the automobile policy in each territory. Because of the current restriction on Third Party Liability, many Insurance Companies have been refusing to offer any coverage to the residents in the northern parts of the Province. These New Brunswickers, unlike others in the south, must turn to the Facility Association and pay rates which are disproportionate for similar coverage. It is presently estimated that approximately 50% of the drivers in Facility Association are covered under Facility Association policies for other reasons than simply a bad driving record. This is simply not acceptable.
Second, the government will follow the recommendation of the Select Committee on territorial rating and instruct the new Automobile Insurance Review Panel to conduct an examination of the impact of allowing insurance companies to create their own territories. The Committee stated there was a direct link between rate regulation, which we are now putting in place, and the setting of territories for rating purposes. It makes sense, therefore, to examine territorial rating in concert with the new regulatory requirements to ensure it leads to more competition, consumer choice, and ultimately greater accessibility to insurance. Our aim is that a truly effective territorial rating system will lead to a reduction in the number of drivers requiring Facility Association insurance.
Third, to stimulate competition in providing access to more automobile insurance choices, the Department of Justice has been directed to study the implications of allowing credit unions and caisses populaires to provide automobile insurance. For many communities in New Brunswick, these financial institutions are familiar and trusted financial partners. Our study will assess whether an additional role in providing insurance can work.
Affordable Automobile Insurance
Mr. Speaker, there is no question that the rising cost of automobile insurance premiums is of most concern to New Brunswick drivers. Over the past year or so, significant double-digit rate increases have become the norm, not the exception, for many people. Taking steps to help stabilize future rate increases is necessary now. Ignoring the reality of rising rates is not an option for this government. At the same time, we cannot ignore what is actually causing rates to rise.
Addressing the issue of affordability therefore requires us to take concrete steps on two main fronts: first, reviewing all future rate increases through the Public Utilities Board process, and second, reducing the impact on everyone’s premiums by capping a key cost driver which is person injury accident claims arising from minor, non-permanent injuries.
To make automobile insurance more affordable to New Brunswickers, the government is therefore undertaking eleven specific initiatives:
First, strong, new regulatory measures will be put in place to review all future automobile insurance rate increases. As part of this, a new Automobile Insurance Review Panel will be formed to support the Public Utilities Board in reviewing and approving future rate increases. Its role will be to review future rate increases, monitor insurance issues affecting both companies and consumers, and undertake analysis and collect accurate statistics on accidents, claims, and industry performance to ensure third-party assessment of the automobile insurance market in New Brunswick.
Second, strong, new regulatory requirements affecting rates will be imposed on the insurance industry. Specifically, the Insurance Act will be amended requiring all insurers wishing to raise their rates by more than 3 per cent over any twelve-month period to appear before the PUB’s new Automobile Insurance Review Panel to justify their increase. All insurers will now be required to file their rates at least once every twelve months. The Insurance Act will also be amended to require a mandatory review should any insurer file new rates more than twice during any twelve-month period. In the interim period, prior to the formal establishment of the Panel, rate reviews will be conducted by the Public Utilities Board.
Third, amendments to the Insurance Act will be introduced to provide for limited, targeted capping of personal injury claims for injuries such as whiplash, neck and back sprain, and other personal injuries which are minor or non-permanent in nature. A victim’s right to fully recover his or her economic losses such as lost wages will not be limited in any way by these changes. In fact, we believe this right is an essential part of a truly fair automobile insurance system.
However, in order to help control the amount paid out in claims, and consequently the amounts collected in premiums, we will place limits or caps on the amounts a victim can recover only for his or her non-economic losses, such as pain and suffering, and only for a limited range of specific types of injuries. It is not our intention to create what is sometimes referred to as a meat chart or target serious or permanent injuries. These non-economic caps will be restricted to whiplash and other types of personal injuries which are non permanent in nature. There will be no change for cases involving more serious or permanent personal injuries. For these cases, we will let the current system continue to assess the amount which should be awarded for non-economic damages, such as pain and suffering.
Again, so it is perfectly clear, we are not capping nor are we restricting recovery of the economic losses, such as lost wages, incurred by victims. We are only targeting the non-economic losses in some cases involving injuries which are not catastrophic nor permanent in nature. We are targeting non-economic awards in soft tissue injury cases and in cases where the personal injuries are not permanent in nature. It is these types of claims that have helped increase insurance costs and have been leading to higher and higher automobile insurance premiums for all drivers.
The amendments which I am introducing today will give the government the legislative authority to define the classification of injuries and the corresponding amounts of the caps for non-economic awards. In keeping with this government’s proven commitment to consult and listen to people, we will ask the Medical community, the Legal community, and others to assist us in classifying the injuries and establishing the corresponding amounts. Our objective is to have these in place by July 1st of this year.
Fourth, we will act upon the Select Committee concern that lawyer advertising may encourage frivolous lawsuits that could drive up costs for consumers. I have already raised this issue with the Law Society, and will be writing to the Law Society of New Brunswick to seek their advice on whether additional restrictions on such advertising are appropriate and could be effective.
Fifth, we will take steps to reduce the number of uninsured drivers on the road whose accident claims lead to higher insurance premiums for everyone else. We will reestablish a closer link between insurers and the motor vehicle registration process to reduce the number of uninsured drivers on the road. This will include reinstating the requirement to show valid proof of insurance before registering a motor vehicle.
Sixth, we will explore arbitration as a more low-cost and efficient alternative to resolving automobile insurance disputes in courts. We will do so by inviting the Law Society of New Brunswick, the New Brunswick Branch of the Canadian Bar Association, industry and other stakeholders to provide their views on the effectiveness of such an alternative approach. This was a recommendation of the Select Committee.
Seventh, we will take steps to enhance driver safety as a way of reducing accidents in the first place and, therefore, insurance claims and costs. The Select Committee made a series of recommendations on this front, such as mandatory safe driving courses for new drivers and a graduated licencing program, that we will look at very carefully.
Eighth, we will follow through on recommendations by the Select Committee to reduce accidents on highways by examining the effectiveness of more rumble strips, flashing lights at intersections, and other measures.
Ninth, we will work with the insurance industry in support of their fraud-reduction efforts, as recommended by the Select Committee. Reducing fraud can help reduce claim costs and, ultimately, premiums.
Tenth, we will amend the Insurance Act to enable regular market insurers to offer group rates for automobile insurance. Currently, this is prohibited. Group insurance has proven successful in reducing premium costs for group members in other forms of insurance and could well prove successful here as well.
Eleventh, we will amend the Insurance Act in regard to the so-called “collateral source rule” which, in the past, has been interpreted and applied by the courts in a way that did not positively impact on insurance costs. Our amendment will help to rectify this situation.
Conclusion
Mr. Speaker, the reform plan we are announcing today is the most comprehensive set of automobile insurance reforms ever undertaken in New Brunswick. It sets out eighteen specific initiatives that we believe will result, over time, in more fair, accessible, and affordable automobile insurance for New Brunswickers.
We have taken the recommendations of the Select Committee, endorsed them in principle, acted upon many, and then gone even further.
We are acting today to bring in strong, new amendments and regulations to help stabilize automobile insurance rates. Our plan is reasonable and balanced. It does not impose a whole new insurance scheme on drivers with drastic changes to how people buy insurance and claim for damages. Rather, it builds upon the existing system with which people are familiar and improves its effectiveness on behalf of drivers and consumers.
Our plan makes insurance companies more accountable for their policies and their practices than they have been in the past.
Our plan addresses a range of issues affecting fair, accessible, and affordable insurance since there is no one single, simple solution to a very complex problem.
Our aim is to help stabilize the cost of automobile insurance in this Province. As I said at the beginning, this is not a problem unique to this Province. It is occurring right across Canada. But we believe we must act on behalf of all New Brunswickers with the tools that we have. The plan I am announcing today does just that.
It brings solutions and actions that we believe will have a real and effective impact of more fair, accessible and affordable automobile insurance for the people of New Brunswick.
We will monitor the effectiveness and impact of our plan over the coming months. If additional steps are needed to reach our goal of a more fair, accessible and affordable automobile insurance system for all New Brunswickers, we will take them.
Thank you Mr. Speaker.