Canadian Underwriter

NS Cap Changes Should Weigh Risks, Rewards: IBC

April 9, 2010   by Terri Goveia

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Any changes to Nova Scotia’s $2500 minor injury cap should carefully weigh risks and rewards, the Insurance Bureau of Canada (IBC) cautions in its submission to the province’s minor cap review.

Limiting minor injury benefits “strike[s] a balance” for Nova Scotians, giving them access to fair premiums and adequate compensation if they’re injured, the bureau states in its February 12 submission to Nova Scotia’s Superintendent of Insurance. While the bureau acknowledges that it agrees with a cap review, it points out that “our public opinion polling indicates that Nova Scotians do not want a return to a pre-reform world,” and that “a means must be preserved to effectively prevent minor injury tort cases from again becoming a source of persistent, year-after-year cost pressures at well in excess of the rate of inflation.”

Weighing options

The submission suggests that the provincial review weigh whether cap alternatives would yield a one-time cost increase, or more prolonged increases in claims costs, noting that “the ability of the industry to absorb increased claim costs is limited.”

The bureau also makes its own recommendations, setting out four alternatives: the first—an increased cap amount indexed to inflation, which would pre-determine claims costs increases. The second option would bump up the number of  injuries considered cap exceptions—adding clearly defined new exceptions, such as injury to internal organs and leg or foot fractures or those affecting a driver’s dominant hand or arm.

Other alternatives apply to the system itself. The IBC suggests a “pure no fault” system as the province’s third option, but points out that Ontario’s experience with a near no fault system “has not been positive” and characterized by high medical rehab costs, litigation, and high premiums.

Though the bureau acknowledges a fourth option—replacing the cap with a deductible—it dismisses it as unfair, noting, “the industry does not consider that the alternative of replacing the cap with a deductible would meet the needs of drivers in Nova Scotia.”

The submission also opposes retroactive application of any cap changes, citing legal, financial and fairness concerns.

This story was originally published by Canadian Insurance Top Broker.