Insurers Refute Reports on Canada’s Home, Auto Policy Prices

April 9, 2006

Canada’s home, car and business insurers have countered recent reports suggesting that the cost of homeowner’s insurance in New Brunswick is rising.

The industry’s attempt to set the record straight about homeowners insurance pricing follows an earlier criticism of a Liberal party survey on auto insurance pricing.

The Insurance Bureau of Canada said the industry’s data show a decline in homeowner’s premiums in New Brunswick. In 2004, the average premium was $358; for 2005, it was $340.

Also, contrary to what was implied in a recent CBC report, the
price of homeowner’s insurance is unrelated to other lines of
insurance, the Insurance Bureau of Canada said in a release. Each line stands on its own.

The insurers pointed out that New Brunswickers also deserve to know that comments in the CBC report attributed to an official from Statistics Canada were taken from an interview conducted more than a year ago.

“We believe it’s irresponsible to present year-old comments
as news and that New Brunswickers deserve to know the current
facts,” said Don Forgeron,vice-president, Atlantic, Insurance
Bureau of Canada.

He added: “Homeowner’s insurance pricing is more complicated
than just average premiums.”

Homeowner’s pricing is looked at in terms of premium per
$1,000 of coverage. In 2004, New Brunswick homeowners paid, on
average, $2.70 of premium for every $1,000 in coverage. In 2005,
they paid, on average, $2.32 per $1,000 worth of coverage, a
reduction of 17.7%. This is at about 2001 levels, when the
average price was $2.33 per $1,000 of coverage.

At the same time, the average size of policy has gone up. Due to increased building costs and content replacement costs, the average amount of coverage has gone from $133,000 in 2004 to $146,000 in 2005.

“In other words, people are buying more insurance, but the
price per unit ($2.32 of premium per $1,000 of coverage) has
gone down. The net effect, on average, has been a decline in
what most people are paying. But some New Brunswickers may be
paying more because the cost to rebuild their homes, or to
replace their belongings, has gone up.”

The IBC said that the price trend of homeowner’s insurance in recent years compares very favorably with other costs related to home
ownership. According to Statistics Canada, home replacement
costs in New Brunswick have risen by 12.1% since 2001. New
housing prices have gone up 12.3%, and maintenance and repair
costs have gone up 10.2%.

IBC also treid to quell what it said were conflicting and misleading reports concerning New Brunswick auto insurance premiums that came from an insurance survey and subsequent correction from the opposition Liberal party.

“The survey conducted for the Liberal party is a farce and it’s
baffling that it has received so much attention and so little scrutiny,”
said INC’s Forgeron. “Asking 255 people what they expect to pay in 2006 is no way to determine what the average premium in the province actually is.”

He criticized the Liberals for releasing “a wildly inaccurate number
one day followed by a correction and another inaccurate number the
next day.”

The average auto insurance premium, using the latest available industry data (January 2006), produces a result of $921. That figure is different from the New Brunswick Insurance Board’s number of $851 for two reasons: It includes every policy, including those issued to high risk drivers; and it does not yet factor in substantial rate reductions approved by the board in the fall of 2005. The Board’s figure was a projection to the end of 2006.

“Clearly, the private sector is delivering cheaper auto insurance in
New Brunswick. “Don’t take our word for it,” said Forgeron. “Ask the New Brunswick Insurance Board. Sensational reports of grossly
exaggerated premium numbers make for good headlines, but they do
not give consumers the information they need.

“The question is why didn’t the Liberals go to the Board? Why did
they choose to release grossly inaccurate information instead? Had
they been more interested in actually serving the people of New
Brunswick, they would have urged them to take advantage of the
competitive marketplace here in New Brunswick.”

Insurance Bureau of Canada is the national trade association
of the private property and casualty insurance industry. It
represents more than 90% of the non-government home, car and
business insurance in Canada.


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