Auto Insurance Reforms in New Brunswick

Backgrounder
July 29, 2003

The New Brunswick government is committed to ensuring more affordable, fair, and accessible automobile insurance for New Brunswickers.

In tort-based jurisdictions across Canada, including all of Atlantic Canada, drivers are experiencing increased automobile insurance costs caused by increased awards for personal injuries resulting from motor vehicle accidents.

The issue of rising costs first came to the forefront in New Brunswick in mid 2001 when consumers began to express to government their concerns regarding significant increases in premium costs for automobile insurance, difficulties in accessing coverage and underwriting practices used by some insurance companies.

Select Committee on Private Passenger Automobile Insurance

In response to the concerns of New Brunswickers, the government established a Select Committee on Private Passenger Automobile Insurance through a unanimous motion of the Legislative Assembly. This all-party Committee was given a broad mandate to examine the issues of availability and pricing of automobile insurance in New Brunswick and to make recommendations regarding legislative and regulatory changes that might be considered by Government to improve the current system.

The Committee held public hearings throughout the province. Various stakeholders, including individual consumers, consumer groups, insurance industry associations, insurers and representatives of the law associations and legal community made public presentations and submitted written briefs.

Following a review of submissions, the Committee completed its written report. The report was tabled in the Legislative Assembly on November 22, 2002.

Automobile Insurance Reform Package

In March 2003, the government responded to the report and accepted almost all of the committee’s recommendations. As a result, the Minister of Justice tabled a comprehensive auto insurance reform package with more than 18 specific initiatives and strong regulations to bring more fair, accessible and affordable automobile insurance to New Brunswickers.

These changes include:

• Removing discriminatory practices. Insurers are now prohibited from refusing to insure a person, cancelling or refusing to renew car insurance policies, based on a comprehensive range of grounds such as a person’s age, the age of a vehicle, or missing a payment.
• Giving enhanced powers and responsibilities to the Public Utilities Board (PUB). The board must now automatically investigate any price increase of more than three per cent in any 12-month period. Any insurer that files a new rate more than twice in a year is subject to a mandatory review by the PUB.
• Capping claims for pain and suffering caused by minor injuries to $2,500. People who suffer minor injuries will still be able to recover economic damages such as lost wages. Insurance companies said this was their largest cost. We expect insurance companies to pass these savings on to their customers.
• The Department of Justice is taking a more proactive approach to providing useful consumer information and guidance on automobile insurance issues to the public, so New Brunswickers can make more informed choices about insurance.
• Protecting the rights of people who are seriously injured to recover all losses for major injuries. For example, a driver who suffers a spinal cord injury will still recover damages for pain and suffering and economic damages.
• Allowing insurers to offer group rates.
• Removing the restriction territorial ratings for third party liability to encourage insurance companies to offer their products in all regions of New Brunswick.

The Insurance Act was amended and two new regulations were brought into force to provide for these changes.

Council of Atlantic Premiers

On June 18, 2003, automobile insurance was at the top of the agenda of a meeting of the Council of Atlantic Premiers at the request of Premier Bernard Lord. During the meeting, the premiers agreed to take a common regional approach to lowering automobile insurance rates and harmonize legislation and regulations respecting automobile insurance in Atlantic Canada. This new regional approach to automobile insurance will consist of the following elements:

• Common regulatory and harmonized rules and procedures to create a more efficient market within Atlantic Canada, and ensure access to more affordable and fair automobile insurance options for consumers. The premiers agreed that harmonization would reduce duplication and therefore costs, and are determined that these cost savings would be passed on to consumers in the form of lower premiums;
• Common underwriting practices to protect consumers from unfair and discriminatory insurance practices;
• Common solutions to addressing rising claims costs, balanced with a consumer's right to legal remedies;
• Common approach and coverage leading to a basic affordable insurance option for Atlantic Canadian consumers throughout the region; and
• Common consumer protection and information approach to ensure Atlantic Canadian consumers have access to information and advocacy mechanisms to help them make informed choices about automobile insurance.
  The premiers agreed to implement this common framework for automobile insurance for Atlantic Canada as soon as possible. Specific steps undertaken include the following.

1. An Auto Insurance Task Force, reporting directly to premiers, has been established, to do the following:
a. prepare a draft set of harmonized legislation and regulations for auto insurance for adoption by provinces; and b. conduct and complete a comprehensive study of the full cost-benefit and legal implications of establishing an Atlantic public automobile insurance system.

2. The Atlantic Insurance Harmonization Project will be directed to complete the drafting of a common Model Act, covering other lines of insurance, by September 30, 2003. The Model Act will be a landmark regional cooperation achievement unique in Canada, and will contain strong consumer protection provisions. This Model Act will be combined with the Auto Insurance Task Force results to create a comprehensive, harmonized legislative and regulatory framework for Atlantic Canada, covering all types of insurance.

3. Each premier further committed to introducing the combined results of the Auto Insurance Task Force and the Atlantic Harmonization Project to their respective legislatures once the task force’s report is complete.

4. Premiers also agreed to collectively urge the federal government to conduct an immediate and full review of all federal regulations relating to the insurance industry, particularly allowable investment practices of insurance companies operating in Canada.
03/07/30