According to the Insurance Bureau of Canada (IBC), the industry’s return on equity in 2015 was negative 28 per cent, more than double than in 2014.
“I know nobody’s losing sleep just because an insurance company is losing money in Newfoundland and Labrador, but it’s what happens when those companies lose money,” says Amanda Dean, IBC’s Atlantic region vice-president. “They’re forced to make tough decisions.”
In some cases it means abandoning the province as a viable market, leaving fewer choices for consumers and often resulting in higher premiums, Dean said.
The IBC says provincial neighbours in Atlantic Canada have models that work well and have actually created a competitive market since introducing a cap on pain and suffering awards for people incurring minor injuries such sprains and strains in the early 2000s.
Drivers in Nova Scotia, for instance, pay close to $300 less, on average, in premiums.
“You’re getting insurance companies entering that want to do business, that want to compete for consumers’ business in those markets. Here you’ve got companies pulling out of the market over the past number of years,” says Dean, pointing to P.E.I., a considerably smaller market where there are more companies writing auto insurance policies than in this province, as an example.
Which is why the IBC and its members are excited for the provincial government’s review of the industry and hopeful for reform that will result in lower premiums for consumers and a more sustainable economic model for the companies.
Led by the Public Utilities Board and Service NL, the first phase of the review will include a closed claims study looking at how much was awarded, where the money was spent and how long it took to treat people.
The second phase will look at the various insurance plans offered and do a jurisdictional scan across Canada to figure out if anything can be changed to reduce costs.
“It’ll be interesting to see where we land and even just taking a jurisdictional approach and looking at what’s happening in other provinces and coming up with a Newfoundland and Labrador-based solution, it’s an incredibly smart process that we’re really looking forward to,” Dean said.
The last such review occurred in 2004 and instead of instituting a cap on minor injuries like the Maritime provinces did, the Newfoundland and Labrador government opted for a $2,500 deductible on pain and suffering damages.
Dean says the IBC and its members don’t necessarily want a cap here, but it is a potential option.
“It seems to have worked to create sustainability in the other three Atlantic provinces over the past 14 years and people are getting better quicker,” Dean said, adding that, despite reports suggesting otherwise, drivers in those provinces still have the right to sue for pain and suffering.
One option the IBC doesn’t support is a move to a government-operated public auto insurance system.
Their position is that not only does the burden of establishing such a system ultimately land on the taxpayer, but it’s not an attractive option to the insurance companies. Dean says it hasn’t yielded positive results in British Columbia.
“(They have) fewer benefits than anywhere in Atlantic Canada, paying higher premiums and I know in terms of industry publications, we’re often reading about how they’re going to keep going financially.”
The government has said it hopes to enact new legislation on the subject in the fall of 2018.