Insurance advocate sees no need for premium increase
Ron Godin says companies take in enough money to absorb higher costs from higher injury awards
New Brunswick's Consumer Advocate for Insurance is joining the provincial government in calling for insurance companies to pay for new auto accident benefits in the province.
Ron Godin says companies are making more than enough money in the province to absorb new expenses without raising premiums. That is the position also advanced by the office of New Brunswick's Attorney General at hearings before the New Brunswick Insurance Board.
On July 1, 2013, accident benefits for those suffering minor injuries in automobile accidents were increased in New Brunswick. Insurance companies now may have to pay out as much as $7,500 for a minor injury, triple the previous limit of $2,500.
The New Brunswick Insurance Board is holding hearings in Saint John this week into how much the increase in benefits will likely cost insurance companies.
Godin is calling for insurance companies to pay the bill entirely by themselves.
"I think that's a very reasonable position," said Godin. "This can be absorbed by the industry.
"The profits are healthy, the markets are very good. I don't see this in the short term being a sufficient reason or a cause for an increase in premiums. I hope not."
Normally an increase in accident benefits would require increased insurance premiums from drivers to pay for them. However, the province is building a case that drivers in New Brunswick are grossly overcharged for car insurance already and shouldn't pay a penny more.
The Toronto firm of Oliver Wyman was hired by the province to assess the new accident benefits. Actuary Paula Elliot's evidence shows insurance companies were over-charging New Brunswick drivers an average of $150 per vehicle prior to the new reforms, more than double what is required to cover the cost of higher benefit ceiling that came into effect on July 1.
"In deriving premiums we have the losses, we have the expenses and we have the profit and those three combined make up what the required premium estimate is," said Elliot. "The board has a mandate to ensure that automobile rates are just and reasonable."
However, insurance board chairman Paul D'Astous has been openly dismissive of Elliot's claims of rampant overcharging by insurance companies in New Brunswick. At an appearance before the Crown corporations committee of the New Brunswick Legislature on Friday, D'Astous told MLAs that Elliot was imagining the gap between what insurance companies charge and what is a fair amount.
"The gap exists in the mind of one consultant, said D'Astous.
The new auto accident benefits for victims will likely cost about $20 million a year to finance. By Elliot's estimate, insurance companies will collect in excess of $70-million from New Brunswick drivers this year above what is a fair amount.