The insurance consumer advocate for New Brunswick believes auto insurance rates in the province are doomed to shoot up because of insurers avoiding having to face regulators for their increases.
Insurance companies must file premium and rate increases every year in NB, but if the rate increase they requested is under 3%, they do not have to appear before the New Brunswick Insurance Board. For years, insurers operating in NB have implemented rate adjustments that have stayed within the limit.
Michèle Pelletier, NB Consumer Advocate for Insurance, suggested that it was this loophole that has led to the province’s current insurance woes.
“They avoided coming and now they have to come ask for the big increase,” Pelletier told CBC News.
The insurance companies that have filed for sizable increases this year said that they are a response to the rising cost of vehicle repairs, as well as the increase in distracted driving-related accidents. Pelletier argued that while that may be the case, the insurers should have started to notice these trends years ago, and they should have been asking for larger increases in years past.
“For a consumer it’s much harder on a budget to have a 30% increase than a 6%, little increase, each year,” the consumer advocate pointed out.
Insurance Bureau of Canada (IBC) Atlantic vice-president Amanda Dean maintained that insurance companies avoid hearings with the board since it costs them over $100,000 to undergo the process. Dean also said that yearly appearances could have resulted in even higher rates, since insurers would be trying to earn back the money they spent.
“It is the cost of doing business and that process needs to be recouped,” Dean told CBC News.
Dean, however, acknowledged the flaws of the current system.
“We’re not saying, by any stretch of the imagination, to let insurers charge what they will,” she said. “We understand as an industry that the government wants to have oversight. But is there a better model, a better process?”