IBC CEO praises Nova Scotia auto insurance reform

In considering reforms to auto insurance, Ontario policymakers should look at what their Nova Scotia counterparts have done, suggested Don Forgeron, president and CEO of the Insurance Bureau of Canada, in a recent speech in Halifax.

Speaking at the Halifax Chamber of Commerce on Feb. 26, Forgeron said that not that long ago, auto insurance in Nova Scotia was in a crisis. Insurers were paying out more in claims than they were collecting in premiums, auto insurance was expensive and hard to get, and consumers were unhappy.

“Today, premiums in Nova Scotia are among the lowest in the country. Auto insurance is affordable, and Nova Scotians have access to the benefits they need, when they need them,” Forgeron told the audience. “Since the reforms, the average cost of auto insurance in Nova Scotia has dropped almost 27 per cent.”

The reforms came into effect on April 1, 2013.

One controversial decision for the Nova Scotia reform was to introduce a limit, or cap, on awards for pain and suffering linked to minor injuries, Forgeron said during his prepared remarks. “The $2,500 cap on these awards was a simple step, but it proved to be absolutely key to containing skyrocketing claims that were making insurance unaffordable,” he said.

Fixing the auto insurance system was no easy feat, Forgeron said, adding that the Ontario government and insurers currently face problems similar to those in Nova Scotia before the reforms. In 2013, the average cost of an accident benefit claims payout in Nova Scotia was $8,600; in Ontario, it was $31,785. Nova Scotia also paid out more than $590 million in claims last year to help Nova Scotians recover from injuries and rebuild damaged property, Forgeron added in his remarks.

Related: Ontario passes bill to cut auto insurance rates an average of 15% 

Late last year, the Ontario government passed Bill 15, Fighting Fraud and Reducing Automobile Insurance Rates Act, which was aimed at reducing reducing auto insurers’ costs. At the time, the government said that rates had fallen about 6% since it first introduced the bill.

Related: Ontario’s Bill 15 a good first step, but claims costs must be reduced, insurer says

Among other items, the bill will:

• reduce the number of days that a vehicle can be stored after an accident without giving notice to the owner and other persons;

• change the definition of “commercial motor vehicle,” under the Highway Traffic Act, to remove an exemption for tow trucks. This essentially means tow truck operators would require a Commercial Vehicle Operator’s Registration (CVOR) certificate;

• move the auto insurance claim dispute resolution system — currently handled by the Financial Services Commission of Ontario (FSCO) — to the Ministry of the Attorney General’s licence appeal tribunal;

• reduce the prejudgment interest rate for non-pecuniary loss for auto accident victims; and

• make changes to the disciplinary process for insurance agents and adjusters.

Forgeron said in his remarks that Bill 15 “will bring in much-needed changes.”

On Oct. 21, Liberal MPP Laura Albanese noted that the current prejudgment interest rate on damages for non-pecuniary loss in a personal injury action was set at 5% per year. “The 5%-per-year prejudgment interest rate for damages for non-pecuniary loss in a personal injury action increases the cost of bodily injury claims in the auto insurance system, which drives up costs for all consumers. This rate has not been adjusted since 1990.”