Wawanesa, New Brunswick’s largest auto insurance company, is looking into ways to fix its increasing losses in the province after deciding not to raise its rates next year by over 35%.
The insurer filed last week for an average 2.83% rate increase for auto premiums in New Brunswick for 2017, despite calculations by company actuaries revealing that a 35.27% increase is required for sustainability.
Wawanesa joined many other firms operating in New Brunswick in setting moderate rate increases for next year leaving even the provincial Insurance Board genuinely surprised. Had most of the auto insurers in the province pushed through with their increases, motorists could pay as much as $247 per vehicle in 2017.
“The product will have to pay for itself at some point,” said Wawanesa vice president Graham Haigh, who warned that mounting claims in the province are a growing problem.
“Trends seem to be getting higher for sure on [claims] so that certainly has us concerned but it’s not something we believe is right to fix all at once,” Haigh told
CBC News.
Haigh remarked that Wawanesa—which covers 97,000 vehicles in New Brunswick and roughly one in every five drivers in the province—will attempt to reduce costs by closely scrutinizing customers who 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,” Haigh noted. “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.”
Nathalie Begin, an actuary and insurance expert with Willis Towers Watson, cautioned that while insurers deferring large increases for smaller ones seemingly benefits customers, a similar gesture 15 years ago caused all sorts of trouble for New Brunswick.
According to Begin, auto insurance rates in the province surged 50% in a two-year period from 2001 after companies postponed increases for years, despite losing profit.
“It’s not necessarily that unusual, it’s something that’s a little bit unfortunate when you really look at it,” Begin said. “Short term it’s potentially a windfall [for consumers] - longer term at some point the companies may have to increase rates much more.”
When faced with the possibility of claims escalating further in New Brunswick, Haigh admitted that the company will have to consider significant premium increases.
“At some point yeah, you could absolutely say that,” he said.
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