This is in response to Brian Jones’ June 15th column, “Destitute insurance companies need your help.”
A lot has been said about auto insurance in Newfoundland and Labrador — but the simple truth is this: changes must be made.
There are not many people who have sympathy for insurance companies. Even people within the industry would agree with you when our own premiums go up.
The problem is that the entire auto insurance system in N.L. needs further review. The current review process is not entirely user friendly — but we need to try to make it so because it is impacting consumers now.
Under the Automobile Insurance Act, all insurers are required to submit for approval any request for premium increases to the board of commissioners of Public Utilities (PUB). This process is long and complicated. We can appreciate that not everyone monitors the site for 10-page rulings about the decision on rate changes. But the information is always made available and the reports include information and supporting documentation from actuaries, lawyers and accountants, and a thorough review is undertaken before a decision is made.
Mr. Jones is correct in stating that the law requires insurance. However, there is also a law that places limits on insurance rates — it is a process that can be found in the rulings and documents that the PUB makes available through their decision-making process.
Those important checks and balances — I believe, is what Mr. Jones was asking for. They exist. The problem is that the information isn’t easy to find.
The insurance industry is restricted to a 10 per cent return on equity (ROE). ROE is the number that takes into account what an insurer takes in premiums and investment income, as well as what is paid out in claims and costs such as employee salaries, etc.
The government keeps track of where every dollar goes within the auto insurance industry through the General Insurance Statistical Agency, which is run by insurance regulators. See here for the latest figures: https://www.gisa.ca/Documents/View/2336
The industry is regulated for the product it can sell, the price it can sell it for, and the data that government wants from it. Those important checks and balances — I believe, is what Mr. Jones was asking for. They exist. The problem is that the information isn’t easy to find. Therefore, the bigger problem is that we need reforms in order to get clarity and simplicity.
As someone who represents the industry, I understand that people may not believe me. However, I leave you with this thought — if insurers were making money in Newfoundland and Labrador, there would be many more players competing for that business.
An independent actuary hired by the PUB reviewed the profitability of insurers in the province and found that insurers have lost money here for the last five years. In the province of Prince Edward Island there are approximately one quarter the number of vehicles on the road as there are here — yet there are many more companies vying for business.
The bottom line is that too many of us can’t afford auto insurance but none of us can afford to drive without it. We need a system that works harder for Newfoundlanders and Labradorians and that is what we want to achieve.
Amanda Dean, vice-president, Atlantic region
Insurance Bureau of Canada
