As the province of Newfoundland and Labrador conducts a review of its auto insurance system, mulling over the decision to put a cap on minor injury claims, experts have warned that the restriction could lead to new problems.
The minor injury cap is one of several measures the province is looking into to help stabilize the region’s struggling auto insurance industry. Other recommendations that were proposed during the province’s insurance review include mandatory accident benefits and the implementation of pre-approved, evidence-based treatment protocols.
A report by Oliver Wyman Limited found that the province’s auto insurance industry profitability dropped from 8% in 2007 to -6% in 2016. Another report sponsored by the government found that insurance rates have steadily increased over the 12 years since the last review.
Intact Financial vice-president of corporate development and head of Atlantic Canada Natalie Higgins told The Telegram that implementing a cap of $5,000 in NL would help contain the rising costs.
“One of the challenges is that we see delays in claims coming forward up to two years at times, before we have a chance to treat an individual for their injuries,” Higgins said. “So we want to see those types of things improve.”
She also warned, however, that the cap might confuse consumers into thinking that they will no longer have the right to sue their insurer.
“There is a misconception around how a minor-injury cap actually works. All it covers is pain and suffering damages. Things like rehabilitation benefits, loss of income, wage replacement … all of that is outside of the cap,” the executive remarked. “You do not lose your right to sue if we have a cap.”
Higgins cited a survey conducted by the Insurance Bureau of Canada that found that it was very important to NL residents that they retain the right to sue.
A group of local personal injury law firms who run the awareness campaign “Insult to injury,” which aims to protect traffic accident victims, additionally cautioned that putting a cap on payments to accident victims takes away their rights to fair compensation while increasing profits for insurers.
Valerie Hynes, a partner at Roebothan McKay Marshall, explained that although total premiums charged for auto insurance have increased over time, the portion of the premiums charged for third-party liability (which refers to injury claim payments) has remained relatively static for the last decade. If injuries led to the increase in premiums, she said, the third-party liability portion should be increasing as well.
She also added that introducing a cap is not a solution, since it means insurers can dictate how much damage victims can claim for.
“You don’t get in an accident and automatically get compensation,” she told The Telegram. “You get in an accident and everybody is upset and emotional, and if there is a significant injury you are taken to the emergency right away.”
“[The solution of implementing a cap] is unconscionable. To say that innocent people who didn’t do anything wrong, who’ve been injured in an accident, should pay for the fact that somebody else hurt them by taking away their right to compensation … is unconscionable.”
