Department of Government Services Consumer and Commercial Affairs Branch Financial Services Regulation Division GOVERNMENT OF NEWFOUNDLAND AND LABRADOR Bulletin Issue 8 - JULY 2005 TO ALL INSURANCE COMPANIES LICENSED FOR AUTOMOBILE INSURANCE On March 16, 2005 and May 12, 2005, the Honourable Dianne Whalen, Minister of Government Services, announced additional automobile insurance reforms which will come into effect on August 1, 2005. These reforms include: a new rate setting process; the elimination of age, gender and martial status as rating elements; a 5 per cent reduction in premiums; the elimination of the prohibition on group rating; the introduction of a point of claim disclosure form; additions to the grounds which cannot be used to decline, terminate or refuse to renew coverage; and additions to the elements prohibited in a company s risk classification system. The legislative changes to bring these reforms into effect are: Bill 26, An Act to Amend the Automobile Insurance Act; Amendments to the Automobile Insurance Prohibited Underwriting Regulations; and Amendments to the Automobile Insurance Regulations. Please visit our web site at http://www.gs.gov.nl.ca/ and go to the Insurance Reform Measures page. NEW RATE SETTING PROCESS The benchmark system for rate approvals has been eliminated. P. O. Box 8700, St. John's, Newfoundland and Labrador, Canada, A1B 4J6 Telephone: 709-729-2595 Facsimile (709) 729-3205
Page 2 Insurance companies entering the marketplace must first file their proposed rates with the Public Utilities Board (PUB) and justify on an individual company basis that the rates are appropriate. Prior approval by the PUB is required before use. For companies already in the marketplace proposed rate increases must be filed with the PUB and justified on an individual company basis. Prior approval by the PUB is required before use. Where a company is decreasing its rates, the proposed decreases must be filed with the PUB but the new rates may be used 30 days after they have been filed. AGE, GENDER AND MARTIAL STATUS The Automobile Insurance Prohibited Underwriting Regulations have been amended to prohibit the use of age, gender and martial status as elements in an insurer s risk classification system effective August 1, 2005. This prohibition, however, does not apply to a discount based on the age of the driver where the driver is at least 55 years of age. Transitional provisions allow insurers to continue to use age, gender and martial status for contracts issued or renewed on or after August 1 until new rates which are not based on these elements have been filed with the PUB. Companies are required to adjust any such contracts to the new rates retroactive to the effective date of the policy within 60 days of the new rates being permitted or approved for use in the marketplace. In addition, Bill 26 stipulates that policies in effect on August 1, 2005, with premiums based on age, sex and martial status, must be re-rated and where the new premium is lower than the premium charged when the policy was entered into, a refund of the difference for coverage from August 1 to the policy expiry date must be issued. However, where a policy is being paid on a monthly basis the remaining payments may be adjusted and where there is less than three months remaining in the contract a credit may be issued toward renewal of the contract. Where a credit is issued and the contract is not renewed a refund must be issued. The elimination of age, gender and martial status as rating elements is not to result in any increase in rates for drivers over the age of 25 and, on average, will result in reductions for drivers under the age of 25. As noted in the Honourable Dianne Whalen s News Release of May 12, 2005, reforms are based on the PUB s review as reported to Government in March 2005. The elimination of these elements requires changes to the Type of Use - Private Passenger section of the Automobile Insurance Statistical Plan. Revised Type of Use Classes are attached to this Bulletin.
Page 3 PREMIUM REDUCTIONS Bill 26 states that effective August 1, 2005, the rates for all types of coverage charged by an insurer for private passenger automobile insurance as approved by the PUB shall be reduced by at least 5%. An insurer may, however, apply to the PUB for rates that have not been reduced by at least 5% and the PUB shall approve, prohibit or vary the proposed rates. Insurers have until September 1, 2005, to file their new rates with the PUB. Where all rates are reduced by at least 5%, they can be used immediately. Where an application for other than at least a 5% decrease is filed, rates must first be approved by the PUB. Any reductions approved by the PUB will be retroactive to August 1, 2005. Reductions apply to policies in force on August 1, 2005. The difference in premium for coverage from August 1 to the policy expiry date may be credited toward renewal of the contract. Where a credit is issued and the contract is not renewed a refund must be issued. POINT OF CLAIM DISCLOSURE FORM Effective August 1, 2005, insurance companies are required to provide a Point of Claim Disclosure Form to all claimants except for a glass breakage claim under Comprehensive Coverage. The form approved for use by Mr. Winston Morris, the Superintendent of Insurance, is attached to this Bulletin. Disclosure is to be made immediately upon the insurance company or its adjuster, representative, agent or broker becoming aware of the claimant s name and contact information. The form is to be signed by the claimant as confirmation of receipt of the disclosure and an insurer is to make reasonable efforts to ensure they receive this confirmation back from the claimant. Disclosure and confirmation of receipt by electronic means is permitted. PROHIBITED GROUNDS Pursuant to paragraph 3. (1) (c) of the Automobile Insurance Prohibited Underwriting Regulations, the Honourable Dianne Whalen has approved the following as additions to the grounds which cannot be used to decline, terminate or refuse to renew or continue a coverage with effect from August 1, 2005: 1. The length of time the applicant or another person who is to be insured under the contract has held a valid driver s licence in Canada or the United States for the type of vehicle being insured; and
Page 4 2. The applicant or another person who is to be insured under the contract has not completed a driver training program, unless the completion of such a program is required by law. PROHIBITED ELEMENTS Pursuant to paragraph 4. (1) (f) of the Automobile Insurance Prohibited Underwriting Regulations, the Honourable Dianne Whalen has approved the following as prohibited elements in an insurer s risk classification system with effect from August 1, 2005: 1. Any elements associated with an excluded driver where the named insured has stipulated that driver as an excluded driver in an Excluded Driver Endorsement pursuant to Section 19.1 of the Automobile Insurance Act; and 2. Any claim under a contract where the claim arose when the driver who is stipulated as an excluded driver in an Excluded Driver Endorsement pursuant to Section 19.1 of the Automobile Insurance Act was the operator of the automobile. Douglas J. Connolly, C.G.A. Deputy Superintendent of Insurance
AUTOMOBILE INSURANCE STATISTICAL PLAN TYPE OF USE Class 01 Class 02 Class 03 Class 05 Class 07 Class 10 Class 11 Class 12 Class 13 Principal Operator 9 or more years licensed Automobile used for pleasure only No driving to and from work, no business, professional or vocational use Annual mileage not to exceed 16,000 kilometers Not more than two drivers, per automobile, in the household, each of whom has held a valid operators licence for the past three years Principal Operator 9 or more years licensed If automobile used for driving to and from work, one way mileage not to exceed 16 kilometers Not more than 2 drivers, per automobile, in the household Principal Operator 9 or more years licensed Occasional Operator less than 9 years licensed Automobile used for Business purposes Principal Operator less than 3 years licensed Principal Operator 3 or 4 years licensed Principal Operator 5 or 6 years licensed Principal Operator 7 or 8 years licensed
DISCLOSURE TO CLAIMANT (FOR USE IN NEWFOUNDLAND AND LABRADOR) You have advised an insurance company that you are making an automobile insurance claim. In making this claim you should be aware of the following: Surveillance: Under the federal Personal Information and Electronic Documents Act an insurance company: Is permitted to conduct surveillance of you without your consent or knowledge. Does not have to disclose that you are or have been under surveillance. Must destroy any personal information collected about you through surveillance after it has fulfilled its usefulness. Criminal Code of Canada It is an offence under the Criminal Code of Canada to make a false claim. A person found guilty of making a false claim may be subject to being fined or imprisoned for a period of time, or to both a fine and imprisonment. A false claim includes inflating the true value of a claim or claiming for things that were not damaged in an accident. Claims Against a Driver Who Allegedly Caused the Accident Where you are making a claim against another driver, that driver s insurance company is obligated to: Settle your claim as quickly as possible. Make interim payments to you pending the final settlement of your claim once the insurance company has determined their insured is at-fault for the accident. To pay you the amount of your final claim settlement in a series of payments over a stated period of time instead of in one lump sum where the accident caused you bodily injury and you request periodic payments. Advise their insured that you have made a claim against him or her. Advise their insured of the total amount paid to you once the claim is settled. Failure to Wear a Seat Belt Where you were not wearing a seat belt at the time of the accident and by law you should have been wearing one, your claim will be reduced by 25% unless you can prove that your injuries would be the same had you been wearing the seat belt. Claim for Loss of Income Any claim for loss of income or loss of your ability to earn income will be reduced by Employment Insurance premiums, Canada Pension Plan contributions and Income Tax that would otherwise be payable if you received the income from your employment. $2,500 Deductible A claim for loss that is not an economic loss will have a $2,500 deductible applied to it. This would apply to a claim for pain and suffering. It does not apply to a claim for economic loss, such as medical expenses or loss of income. You are obligated to confirm in writing or by e-mail that you have received this disclosure form. Sign below and return this form to the insurance company (keep a copy for your records) or e-mail the insurance company stating I acknowledge receiving the Disclosure to Claimant Form. Date Claimant s Signature