Insurance company will try other fixes before imposing large rate increases

New Brunswick's largest auto insurance company says it decided against imposing large rate increases on drivers next year to address mounting losses in the province because it has other fixes it can try first.

But Wawanesa vice president Graham Haigh warns rising claims in the province are a problem and without a turnaround it will bite motorists eventually.

"The product will have to pay for itself at some point," said Haigh from Wawanesa's head office in Winnipeg.

"Trends seem to be getting higher for sure on [claims] so that certainly has us concerned but its not something we believe is right to fix all at once."

Last week, Wawanesa filed for an average 2.83 per cent rate increase for 2017 auto insurance premiums in New Brunswick, despite calculations by company actuaries showing a 35.27 per cent increase is required.

Other companies made similar applications with the New Brunswick Insurance Board, documenting that large hikes in premiums are required in New Brunswick, but then not applying for them.

Trouble on the horizon?

Actuary and insurance expert Nathalie Begin with Willis Towers Watson said although that sounds like a straight win for consumers, similar conduct by insurance companies in New Brunswick 15 years ago triggered all kinds of trouble.

Auto insurance rates in the province jumped 50 per cent in a two year period beginning in 2001 after companies deferred increases for years despite losing money in the province.

The increases triggered a political crisis that nearly toppled the government of then Premier Bernard Lord.

"It's not necessarily that unusual, It's something that's a little bit unfortunate when you really look at it," said Begin

"Short term it's potentially a windfall [for consumers] longer term at some point the companies may have to increase rates much more."

According to recently released information Canada's General Insurance Statistical Agency (GISA) auto insurers had their worst financial year in New Brunswick since 2001 last year. Insurance claims reached $304.8 million, a $70 million increase in three years, just as premiums hit a 15 year low.

Haigh says Wawanesa, which covers 97,000 vehicles in New Brunswick and about one in every five drivers, will try and trim costs by paying closer attention to which customers are driving claim costs up.

"We think we can do a better job in making sure that people are priced appropriately for their risk going forward," said Haigh.

"We can do it in such a way that doesn't require us to go after a significant rate increase and dislocate our business and have people really up in arms about their rate increase."

Still Wawanesa said if claims continue to escalate in New Brunswick, significant increases in premiums will have to be considered.

"At some point yeah, you could absolutely say that," said Haigh.