Frequently Asked Questions and Answers
Q: Why didn’t the government just accept the Select Committee Report?
A: The government’s plan is a comprehensive including more than eighteen initiatives designed to bring more fair, accessible, and affordable automobile insurance to New Brunswickers. 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, it is obvious that more is needed 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.
Q: Are other jurisdictions having the same difficulty as New Brunswick>?
A: 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 neighbouring 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.
Q: Why did the government decide not to adopt a publicly funded or a full no-fault system?
A: 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 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.
In addition, 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. 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.
Q: What will be the new role of the Public Utilities Board (PUB)?
A: 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 and assessment of the automobile insurance market in New Brunswick.
Any rate increase averaging over three 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.
Q: What kind of restriction is the government placing on Insurance companies?
A: The Insurance Act will be amended to allow for strong, new regulations to prohibit unacceptable underwriting practices. Specifically, insurers will be prohibited from refusing to insure a person, and from cancelling or refusing to renew a person’s existing automobile insurance policy on the basis of eight specific grounds in any combination:
- age of the person
- age of the vehicle
- past claims under the policy for which the person was not at fault
- missing a 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 seniors.
Q: Will there be any new information made available to the public to assist them with making decisions on insurance?
A: The Department of Justice will 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. Greater consumer information will help many people make more informed automobile insurance choices. Government can act as an effective consumer advocate in helping prepare and publish such information.
Q: Currently rules prevent rating third party liability. Will the government lift the restriction?
A: 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.
Q: Some insurers have been refusing coverage in the north of the Province. What will this plan do to help that situation?
A: 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 per cent of the drivers in Facility Association are covered under Facility Association policies just because there is no other market available. This is simply not acceptable.
Q: Will the government allow territorial rating?
A: 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.
Q: I have a credit union in my community. Will credit unions be allowed to provide auto insurance?
A: For many communities in New Brunswick, these financial institutions are familiar and trusted financial partners. The Department of Justice will be studying the implications of allowing credit unions and caisses populaires to provide automobile insurance. Our study will assess whether an additional role in providing insurance can work.
Q: Will the Public Utilities Board be allowed to review and approve insurance rate increases?
A: Strong, new regulatory measures will be put in place to review all future automobile insurance rate increases. The new Automobile Insurance Review Panel will 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.
Q: At what point will the Public Utilities Board be asked to review and approve rate increases?
A: The Insurance Act will be amended requiring all insurers wishing to raise their rates by more than three 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.
Q: Is the government capping all personal injury claims?
A: The new amendments to the Insurance Act will provide for limited, targeted capping of personal injury claims for minor injuries, such as whiplash, neck and back sprain, and other personal injuries which are non-permanent in nature. It is not the intention to eliminate a victim’s right to fully recover economic losses. There will be no change for cases involving more serious or permanent personal injuries. For these cases, the current system continues to assess the amount which should be awarded for non-economic damages, such as pain and suffering.
Q: How will the amount of the caps and the type of injuries be decided?
A: This plan will give 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 legal community, insurance companies, the Medical community, and others to assist us in classifying the injuries and establishing the corresponding amounts. These will be in place by July 1, 2003.
Q: What is the government doing about eliminating uninsured drivers?
A: The government 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 re-establish 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.
Q: Would the government considering other dispute resolution mechanisms other than going to court?
A: Yes. The government will undertake to 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.
Q: Reducing accidents is a good way of reducing costs. What does this plan do to promote the reduction of accidents?
A: The plan takes several 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 licensing program, that we will look at very carefully. We will also examine the effectiveness of more rumble strips, flashing lights at intersections, and other measures.
Q: Will the new plan allow for strategies such as group rates?
A: Group insurance has proved successful in reducing premium costs for group members in other forms of insurance and could well prove successful here as well. The Insurance Act will be amended to enable regular market insurers to offer group rates for automobile insurance.