How the old catastrophic impairment definition still affects Ontario auto insurers

It has been more than two years since Ontario changed the definition of catastrophic impairment, but Canada’s largest auto insurer is still dealing with claims that arose under the old cat definition.

“Clearly, people are trying to get as much as they can from their claims before the new regime, but there is a limit to that as we close more and more of the files from those prior years,” Intact Insurance CEO Charles Brindamour said during a recent conference call on the company’s quarterly earnings.

By “new regime,” Brindamour referred to new criteria first announced in Ontario in August 2015 to determine whether or not an accident benefits claimant is catastrophically impaired. The new criteria applied to accidents occurring on or after June 1, 2016.

The revised definition of  a catastrophic impairment includes:

• new and/or updated definitions and criteria for traumatic brain injuries for adults and children, amputations, ambulatory mobility, loss of vision, and mental and behavioural impairments, and introduces a new process for combining physical with mental and behavioral impairments.
• provision for an automatic designation of catastrophic impairment for children with traumatic brain injuries in specified circumstances.

The change to Ontario’s catastrophic impairment definition reduced claimants’ ability to claim psychological damage as a trigger to become catastrophically impaired, Brindamour said. “Just because you say you are deemed catastrophically impaired does not [necessarily] mean you actually are.”

The tightened definition would explain why insureds are making sure to put in their claims for accidents occurring prior to June 1, 2016, before the new guidelines took effect.

Intact reported July 31, 2018 that its combined ratio was 95.6% in personal auto for 2018 Q2. Of that, 2.3 points were attributable to prior-year development (in essence, the accidents happened before 2018, but not enough money was set aside for reserves). Much of that prior-year development was from Ontario accident benefits claims, where claimants were saying they are catastrophically impaired, Intact’s vice president of claims, Patrick Barbeau, told investment research analysts during the July 31 conference call.

The total number of prior-year development claims is “actually very small … but a claim for catastrophic impairment is worth $1 million or more,” said Brindamour, who suggested other insurers may be having a similar experience. “I think this an an industry-wide issue, absolutely.”

In Ontario, an auto accident benefits claimant who is catastrophically impaired could be covered for more than $1 million in accident benefits, compared to tens of thousands of dollars if they are not catastrophically impaired. The exact limits depend on exactly when the accident happened.