A surge in fire insurance claims in northern New Brunswick over the last five years is causing the Co-operators General Insurance Co. to enforce new rules that will limit the number of clients it will insure.
The company's decision to cut back clients and increase premiums in northern New Brunswick is drawing parallels to the 2003 auto insurance controversy in the province.
The Co-operators is sending out letters to its clients in northern New Brunswick, between Bathurst and Edmundston, instructing them to reapply for their home insurance.
'I think that what they're doing is softening up the market. This is the exact thing that they did with auto insurance.' — George McAllister, lawyer
The insurance company said it has been losing money for the last five years because of an increase in fire claims.
Since 2005, 67 per cent of house insurance claims in northern New Brunswick have been due to fire, compared with 37 per cent for the rest of the province.
Leonard Sharman, a spokesman for the Co-operators, said that when clients reapply for their insurance, the company will be conducting home inspections and looking for potential problems such as old wiring, and wood and oil heating systems.
Sharman said the large number of older homes in the area has resulted in more fire claims and steep losses for the company.
"It's actually $1.86 that we've paid out for every dollar we've taken in," Sharman said.
The Co-operators' recent decision to alter how it treats customers in the north compared with clients in southern New Brunswick is bringing back some bad memories for George McAllister, a Fredericton trial lawyer.
"I don't think insurance companies are that well-received anymore," McAllister said.
"I think that what they're doing is softening up the market. This is the exact thing that they did with auto insurance."
McAllister said people who are dropped as clients by the company could run into even more problems.
"You can't get a mortgage if you can't get your house insured," he said.
Unlike automobile insurance, home insurance is not regulated by the New Brunswick Insurance Board.
Auto insurance controversy
New Brunswick politicians are familiar with insurance controversies.
The former Progressive Conservative government stumbled into the insurance controversy in 2002, when rates were skyrocketing primarily in northern New Brunswick.
The Bernard Lord government made some auto insurance reforms before the 2003 provincial election. Feeling the political heat from an angry public, the Tories were forced to announce a series of additional measures at the midpoint in the election campaign that would cut rates.
The Tories were able to win a small majority government in 2003.
The insurance issue flared up in the 2006 campaign again, but did not dominate the election discussion as it did in 2003. The next New Brunswick election will be held on Sept. 27, 2010, according to the province's fixed election date law.
Progressive Conservative MLA Jody Carr, the opposition's insurance critic, said MLAs will be hearing more about the insurance issue in their ridings.
Carr was one of the Tories who survived the 2003 insurance election, and he believes there are parallels between the two insurance controversies.
"That's what we're very concerned about in the opposition. Is this a growing trend across the province? Are we going to find a situation where people will not be able to get insurance? That's a concern," Carr said.
"Are we finding ourselves in a position where people are being treated unfairly? Are we being in a position where people will be given less protection rather than more protection? And these are some significant concerns that people are raising."
The PC MLA said the Co-operators has even reduced what it will pay out if a home is damaged or destroyed.
"The company's deciding to give coverage for market, and not replacement [value]. And that means that people may pay a different premium, but they'll have less protection," Carr said.