Here's why your car insurance bill is too high, and why that's so hard to fix

Understanding the problems plaguing the Newfoundland and Labrador car insurance industry is about as easy asa foggy drivedown a pothole-ridden highway.

Ask any driver the problemand,after their (road) rage subsides, and they'll probably point to the dent premium payments make intheir bank accounts.

On average, people in this province pay the most in premiums in Atlantic Canada35 per cent more than our Maritime neighbours, according to numbers from the Insurance Bureau of Canada.

That sounds lucrative for Newfoundland and Labrador insurance companies, but theysay they're barely turning a profit.

The provincial government, which regulates the entire industry, is mulling over making some changes on the heels of a report releasedin January by the Public Utilities Boardon rising premiums.

The government has beentight-lipped about what changes are in the works, with an announcement set for Monday.

So in the meantime, it's our pleasure to present to youour handy guide to the clear-as-mud world of auto insurance.

Why do we pay so much?

You would think such a simple question would beget a simpleanswer.You would think.

Premiums, on average,have been rising steadily since 2005, according to the PUB report. That'sthe last time the province introduced reforms into the industry,and around that time Newfoundland and Labrador was roughly on par with the Maritimes.

But by 2017, drivers here were paying $318, or about a third, more than the Maritimes.

Industry players pointto what they say is a major problemin the system:theprovince has many more bodily injury claims,with a higher average cost, than the Maritimes.(There are other issues at play, but we'll talk about those later.)

More claims mean morepayouts, which even though the percentage of drivers making these claims is tiny meanpremium rate hikes overall, for everyone. But even with those hikes, the PUB report notes that insurance companies haven't achieved "reasonable" profit levels since 2012.

"The system here is a very expensive system to pay for," said Amanda Dean, a vice-president with the IBC.

Boo hoo, the insurance companies aren't raking in cash. Why is that a problem?

We get it. Paying insurance is not a fun thing to do.

But it is a necessary thing to do: it's illegal to drive without insurance. Soit's in a driver's best interest to have as much choice ininsurance companies as possible, as thatensures competitive rates.

But when a market gets hard to operate in, only a few companies can make a viable go at it, and that's happeninghere.

The PUB report notes the auto insurance market is highly concentrated in Newfoundland and Labrador compared with the rest of Canada, with fewer insurers operating, and about 98 per cent of all the premiums written by just 15 insurers.

With less competition, fewer choices, higher prices and more sector instability overall,having insurance companies pull out of the province is a bad thing.

How do we make drivers and companies happy?

If we knew the answer to that, this article probably wouldn't exist.

The IBC has floated one suggestion: follow in the footsteps of the Maritimes, Alberta and British Columbia and have the province tweak insurance plans to include acap on minor injury claims.

Dean saidsuch a cap, set at $5,000, wouldn't apply to medical bills or lost wages.Rather, it would affect an extra amount, often negotiated in court, that attempts to compensate someone fora variety of emotional and physical falloutthat varies from person to person what's called in the industry "pain and suffering."

The number ofpain and suffering awards has been on the increase here, as well as the average amount of money awarded.

Is a cap on minor injury claims a good thing?

The insurance industry says it is.

The IBCsays premiums got cheaper in theMaritimes after such caps were put in place there.

• Insurance has become a political issue in N.L. Follow our coverage of this year's election campaign

But in New Brunswick, which has a $7,500 cap, several insurers have recently applied for rate increases. Its largest insurer has raised its rates three times since 2016. And in a campaign for a cap in Newfoundland and Labrador, the IBCinitially used outdated data from New Brunswick thatdidn'tincludethose increases.

• Auto insurers keep quiet on large rate hikes in N.B. during campaign in N.L.

Muddying the waters further, the PUBreport states that while a cap would save money for insurance companies and might stabilize insurance rates, it's "unlikely to result in rate decreases for consumers."

That unlikelihood is why the province's consumer advocate can't get behind such a cap.

Plus, personal injury lawyers have also taken issue with a cap on pain and suffering.

LawyerColin Feltham said such amounts can cover extra physical or psychological therapy needed in the wake of a crash, compensate for losing the ability to take part in activities the victim previously enjoyed, or give a person some extra padding if they are forced into early retirement due to anaccident an endless number of scenarios that each require individual attention.

Are any other options on the table?

A few have been floated, like higher deductibles for minor injury claims, or changes outside the insurance industrythat would affect drivers often incorporating those "other issues" contributing to Newfoundland and Labrador's premiums, mentioned earlier.

I nearly forgot about those!

You're forgiven. This is pretty complicated.

Thanks. What are those issues?

There are several, but overall,two biggies. First up is uninsured drivers.

Yet again, Newfoundland and Labrador takes a dubious honour among Atlantic Canadian provinces, for having the highest claim frequencyand costsinvolving uninsured drivers.

It's impossible to track the exact number of uninsured drivers, but the PUB report estimates it could involve three to seven per cent of vehicles on the province's roads, and the Insurance Brokers Association of Newfoundland says as premiums continue to rise,the number of uninsured drivers also increasesas insurance becomes increasinglyunaffordable.

Then, when those drivers get in accidents, it's the insurance system, including drivers, that have to absorb the costs.

A few fixes have been proposed, such as better communication between entities, like insurance companies and the department of motor vehicle registration.

One other issue that keeps cropping up is safety: fewer crashes mean fewer claims.

Accidents in RNC jurisdictions there are no statistics from the RCMPon thishave been dropping since 2012, but personal injury lawyers say more is done on the safety side of thingsthinkbetter traffic-calming measures, mandatory vehicle inspections, increased driver education moreaccidents could be prevented.

Got all that?

Sort of.

I hear you. We didn't even get into taxi insurance!

If you want to go any deeper, the entire 139-pagePUB report is here: a thorough, if slightly dry read.

So when can we expect any insurancechanges?

The Minister of Service NL, Sherry Gambin-Walsh, and the Minister of Justice and Public Safety, Andrew Parsons, are set to make an announcement on "amendments" to the provincial legislation surrounding car insurance on Monday.

Stay tuned!

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