N.B. drivers overpaid millions for insurance, say analysts
Insurance board begins hearings on whether premiums for automobile coverage should increase
New Brunswick drivers shouldn't pay a dime extra on their auto insurance to finance new automobile accident benefits in the province because they are already significantly overcharged by insurance companies, claim two experts hired by the province.
New Brunswick loosened restrictions on auto insurance accident claims on July 1, including tripling the amount people can claim for minor injuries following a collision, to $7,500. The New Brunswick Insurance Board begins hearings Monday on what those changes will cost insurance companies and whether driver premiums in the province should be increased to pay for them.
But in a report commissioned by New Brunswick's Office of the Attorney General, actuaries Paula Elliot and Ted Zubulake with the Toronto firm Oliver Wyman estimate that although more generous accident benefits will add between $40 and $79 per car in costs to insurance companies, it is a fraction of what those companies already overcharge New Brunswick consumers for coverage.
"We estimate that average premiums currently charged in New Brunswick for private passenger automobiles to be higher than…the required average premium by approximately $152 to $174 per vehicle," Elliot and Zubulake write.
We estimate that average premiums currently charged in New Brunswick for private passenger automobiles to be higher than…the required average premium by approximately $152 to $174 per vehicle.- Report by Oliver Wyman firm
The two say that immediately prior to the July 1 changes, low accident claims in New Brunswick meant insurance companies could hit their profit targets in the province – an after tax return on equity of 12 per cent – by charging drivers an average premium of $635 per car. Instead, this year companies have been charging, with the Insurance Board's approval, an average of $787 per car. Spread over the province's 466,000 insured automobiles, it suggests provincial motorists have been paying $70.8 million too much for auto insurance this year.
It's the third time in the last four years Oliver Wyman has prepared a report for the province showing New Brunswick drivers have been consistently overcharged for auto insurance since industry-requested reforms were adopted by the former Lord government in 2003. The company has documented several hundred million dollars in excess charges, but in an appearance before the legislature's Crown corporations committee on Friday, New Brunswick Insurance Board chair Paul D'Astou openly ridiculed Oliver Wyman's analysis and the idea there is any gap between what provincial drivers pay for insurance and what they should pay.
"The gap exists in the mind of one consultant," said D'Astou, when asked about Oliver Wyman's claims by Moncton Liberal MLA Chris Collins.
"So should the province of New Brunswick stop hiring this consultant?," asked Collins.
"Well that's for them to decide whatever they want to do with that consultant," answered D'Astou.
Former New Brunswick Attorney General Kelly Lamrock noted Oliver Wyman has been hired by both Liberal and Conservative governments in New Brunswick and said D'Astou's criticism of the firm is unfounded.
"The fact that that analysis has survived partisan changeovers probably speaks volumes," said Lamrock.