Lawyer calls for retroactive removal of Nova Scotia cap

Nova Scotia’s $2,500 cap on minor injuries was never necessary and should be removed retroactively, Richard Halpern, an Ontario personal injury lawyer, wrote in a submission to Nova Scotia’s superintendent of insurance.
In January, the province’s superintendent of insurance released a discussion paper that questioned the effectiveness and legitimacy of Nova Scotia’s cap on minor injuries. It called for public input until Feb. 15, 2010.
“If one looks at the claims costs pattern for Nova Scotia in the years leading up to the cap, one will readily see that there was no support for the cap based on bodily injury claims costs,” Halpern wrote in his submission.
The average premium in 2001 was $675, and this increased to $800 in 2002, a rise of 18.5%, Halpern noted. In the same period, he continued, the average claim per vehicle fell from $640 to $604, a drop of 5.6%.
Premiums in 2003 rose by 18.75% while claims costs fell by 12.2%, he wrote. The cost-to-premium ratio in 2000 was 111% and had dropped to 55% in 2005.
“This means premiums are getting too high in relation to costs,” he said. “Higher, yet gradual increases in the period 1996 to 2000 would have mitigated any reason to complain of the rate increase that occurred in 2002 and 2003.
Halpern also noted that while the auto insurance industry was not sufficiently profitable between 1996 and 2001 (with an average ROE of 3.2%), in 2003 the insurance industry reported an ROE of 30%.
“The cap was a premature knee-jerk reaction to a temporary episode that was well on its way to resolving,” he argues. “Doing nothing would have solved the problem.
“While retroactive changes are usually problematic in most situations, auto insurance is unique. Given the lack of justification for the 2003 cap and the profits enjoyed by the auto insurance industry in Nova Scotia since the cap was introduced, this is one of the few situations in which a retroactive change can be justified.
“It is in the interests of access to justice and consumer rights that the cap can be revoked retroactively.”