As the province of Newfoundland and Labrador continues to mull over how it should fix its messy auto insurance system, another expert has thrown his hat into the ring.
Fred Lazar, an associate professor of economics at York University in Toronto, presented his report to the Public Utilities Board (PUB) insurance review hearings last week, which suggests that NL drivers have been paying too much for insurance premiums since 2011.
Lazar’s report runs contrary to statements made by the Insurance Bureau of Canada (IBC) and Oliver Wyman (hired by the PUB to prepare reports for the public hearings) – that insurers are losing money in the province.
According to Lazar’s report, the amount of overpaid premiums from the year 2011 to 2016 is between $54 million and $92 million.
“Was there overpayment in every year (2011 to 2016) of premiums? The answer to that is unequivocally ‘yes,’ regardless of the actual performance of the insurance companies,” Lazar said during the public hearings last week. “Now, how can I say this with certainty? Because the assumptions that were used in setting the premiums used a return on equity that was too high, used a return on investment that was too low, and did not look at best practices with regard to expenses.”
The Telegram reported that Lazar and co-author Eli Prisman prepared the report on behalf of the Campaign for Accident Victims – a group consisting of law firms and lawyers who represent auto accident victims.
The IBC has claimed that insurers in the province are losing money primarily due to the high cost of settling bodily injury claims. To stabilize the high costs, the bureau proposed capping minor injury claims at $5,000, plus several other reforms which would expedite healthcare for accident victims.
The Campaign for Accident Victims, however, claims that accident victims will lose their right to sue for fair compensation if the injury cap is imposed. The group also argued that insurance premiums have not stabilized in other provinces that have implemented the cap.
