Mitigation for Car Accident Victims

The province has tripled the limit on insurance claims for minor in­juries suffered in car crashes.

Finance Minister Graham Steele, who is responsible for the Insurance Act, said Wednesday increasing the maximum award for pain and suffering to $7,500 from $2,500 will lensure crash victims are compensat­ed fairly.

The province is also changing the definition of minor injuries to mean sprains, strains and whip lash.”What ‘s going to happen as a result of these changes is more people are going to get more compensation,” Steele said. “Because the definition now in­cludes what any ordinary person on the street would call a minor injury, the cap will apply to many fewer people.”

Steele said he is confident the insurance industry can absorb the changes without charging people higher premiums, as indicated in an actuary’s report the province com­missioned. That report determined that peo­ple in Nova Scotia pay an average premium of $800. “We get a better insurance regime and we get it at no additional cost to Nova Scotians.”

The returns received by insurers under the $2,500 cap have been more than the 12 per cent they had targeted, he said. The actuary’s report determined that insurers earned an after-tax return on equity of 26 per cent from 2004 to 2008, compared with 17 per cent from 1999 to 2008.

Insurance firms must get approval for rate increases from the Utility and Review Board.

As of Wednesday, injuries suffered in car crashes will be subject to the new measures. But the amendments and regu­latory changes won’t take effect until July 1 to give insurance companies time to prepare.

Applying the changes to peo­ple who were injured in crashes from 2003 to 2010 would have created too much instability in the insurance industry and made it unlikely companies could continue charging affor­dable rates, Steele said. Such a move would cost insurers $69 million, the actu­ary’s report said.

“It’s exceptionally rare for any law to be passed with ret­roactive effect,” Steele said. “It is not reasonable, in my view, for people to expect that we will not only change the law from now forward, but that we will reach into the past and deem the law to be different than it was.”

Another change to take effect at a later date will provide the option of full-tort coverage to allow an injured person to seek greater compensation. The only other province to have that is Saskatchewan, which also has a public auto insurance system.

The full-tort coverage is being examined as part of a review of auto insurance. Steele expects to wrap up by the end of the 2010-11 fiscal year.
The Conservative government of John Hamm put the $2,500.00 cap in place in 2003, with support from the Liberals, as part of a strategy to lower insurance premiums. The limit was to make up for a 20 per cent rollback on auto insurance rates and a one-year rate freeze.

“We have known right from the beginning that the regime implemented by the previous government was not fair,” Steele said. “We opposed it when it came in and we have continued to oppose it through out-that time.”

Bill Adams, a regional vice-­president with the Insurance Bureau of Canada, said the changes will cost the insurance system more, but it’s too early to determine if there will be higher rates for drivers.

“Clearly, that’s going to cause claims costs to increase. How much they’re going to increase, what the effect is going to be, whether there’s going to be more ‘court cases as a result of this and the costs incurred there, we don’t know.”

Insurers had set aside reserves in case the cap was removed completely, Adams said.

Bedford lawyer Barry Mason, who challenged the cap on constitutional grounds but lost, called the changes an improve­ment over the “draconian” law the Hamm government introduced. But he was disappointed the province didn’t scrap the cap and make the changes ef­fective retroactively.’

Mason said insurance compa­nies in Nova Scotia have made millions of dollars more since the cap was introduced.”Those profits were made on the backs of accident victims.”

Conservative MLA Allan Mac­Master said he is concerned the changes will result in drivers paying higher premiums. “These changes are going to drive up the cost for the indus­try. The question is whether or not the industry will pass that on to consumers, and we don’t know yet. The industry will have ‘to decide that.”

Liberal MLA Leo Glavine said some of the changes, including raising the cap, are needed.

But Glavine expressed sur­prise that the NDP didn’t make it retroactive, abandoning crash victims it had promised to help over the last seven years.

They brought people in here with some of the most hard­luck stories who had been in­jured and they said, ‘We will fix a wrong.’ And that has not been done in this piece of legis­lation.

“All of those people are still on their own.”

Glavine suggested that the insurance changes could be the first step to introducing a pub­lic system, which the NDP had advocated in the past.

Steele has ruled out making more changes for at least two years.

With David Jackson, provincial reporter (jsimpson@herald.ca)