New Brunswick

Many N.B. drivers will see insurance rates rise

New Brunswick drivers renewing their auto insurance with Intact or Trafalgar could be paying up to 7.5% more for coverage beginning next week, even though the province insists the companies already make too much money and consumers should be getting rate reductions instead.

Increase up to 7.5% will affect 60,000 drivers insured by Intact or Trafalgar

Drivers who insure with Intact or Trafalgar, about 15% of the New Brunswick market, will see their rates rise, by as much as 7.5%. (CBC)

New Brunswick drivers renewing their auto insurance with Intact or Trafalgar could be paying up to 7.5% more for coverage beginning next week, even though the province insists the companies already make too much money and consumers should be getting rate reductions instead.

The companies say increases will vary for customers but will not exceed 7.5% in any individual case.

They were approved by the New Brunswick Insurance Board following a hearing in March and take effect for current customers who renew their policies on June 17 or later.

It is the largest increase approved in the province in more than a decade and will eventually affect about 15% of New Brunswick drivers.

Intact is the second-largest auto insurer in New Brunswick, and also owns Trafalgar. The two companies cover about 60,000 vehicles in the province.

The rate increase was approved by the New Brunswick Insurance Board, despite arguments from the Attorney General's office that it should be lowered. (CBC)
New Brunswick Attorney General lawyer Michael Hynes represented the public at the Intact and Trafalgar hearing and urged the insurance board to reject the increase.

He also argued for a cut to company rates instead, based on a review of the applications by Toronto actuary Paula Elliott, who was hired by the province.

In a direct and sometimes testy exchange with Intact's lawyer, Nadia MacPhee, Elliott said the company would make an excess profit in New Brunswick with anything other than a rate cut.

"Just so I'm clear that your position in this application (is) that Intact should reduce its rates," asked MacPhee. "Yes it is," said Elliott.

"By 3.7%? Is that right?" continued MacPhee. 

"Based on the assumptions we put forth in our report, the resulting rate level indication was minus 3.7%," answered Elliott.

"And I take it that in your opinion that would be fair and reasonable?" "That is correct."

More support for reduction

Former consumer advocate for insurance, Ronald Godin, who still works for the advocate's office as its director, attended the hearing and also argued for a rate reduction.

The consumer advocate's office also agreed that insurance rates should be lowered for the two companies. (CBC)
"We concur with the issues and concerns raised by the Attorney General." said Godin during the hearing.

In an interview, Godin said he found the Attorney General's position much better for consumers and well-documented by Elliott.

"The consumer was going to be better off with a decrease than a substantial increase," said Godin. "I concurred and I encouraged the board to accept the representations made by the Attorney General's office. I found them to be very solid."

But the Insurance Board sided mostly with the companies.

Intact said its own analysis showed it and Trafalgar were really entitled to an average 11.85% increase, but to avoid rate shock and losing customers ("policyholder dislocation"), it was applying for an average increase of 6.86%.

It said it would cap individual increases to a maximum of 7.5%.

The Insurance Board eventually gave the company 96% of what it asked for and approved an average increase of 6.56% with no single increase to exceed 7.5%.

Several companies get increases

Auto insurance increases have been common in the province this year.

The largest insurer, Wawanesa, was approved for an average increase of 2.35% on May 1st, but did not require a review.

In New Brunswick, auto insurance companies who apply for increases less than 3% are not subject to an automatic hearing and most kept their applications below that threshold.

In two other cases where companies asked for more than 3%, the Insurance Board sided mostly with the companies.

It approved all of the 5.4% rate increase applied for by IAO Actuarial Consulting Services Inc. despite arguments from Hynes and Elliott to lower it to 3.4%.

IAO helps sets rates for a number of companies too small to afford their own actuarial departments.

Several increases have been granted to auto insurance companies in 2016. (David Zalubowski/Associated Press)
In another case, Portage Mutual Insurance had its request for a 7.7% increase lowered by the board to 6.4% although Hynes and Elliott had argued for a much lower increase of 2.25%

Godin said he does not believe the insurance board favours industry generally, even if did mostly adopt industry positions in this year's hearings.

"I have not had the impression that the board is more inclined to adopt the companies' position. I think they look at the evidence on both sides and come up with their own decision," said Godin.