April 25, 2019 by Greg Meckbach
If the Newfoundland and Labrador government increases the deductible for pain and suffering awards in auto accident lawsuits, a reduction in claims costs will not necessarily follow, says the Insurance Bureau of Canada’s CEO.
Newfoundland and Labrador has had a deductible of $2,500 on pain and suffering damages arising from motor vehicle accidents since 2004. The provincial government announced Apr. 15 that it is proposing to raise that deductible to $5,000.
“That is simply going to inflate claims costs by whatever the increase in the deductible is, which is what happened when they introduced the deductible in the first place,” IBC CEO Don Forgeron told Canadian Underwriter Thursday after IBC’s annual general meeting in downtown Toronto.
A provincial election is scheduled May 16 in Newfoundland, Forgeron noted during the formal portion of the AGM.
In addition to increasing deductibles on pain and suffering awards from auto personal injury lawsuits, the government proposed several other reforms last week. Among them are a mandated discount for winter tires, treatment protocols for common injuries as the primary payer, and blocking uninsured motorists’ access to the Uninsured Automobile Fund.
“The success of these reforms hinges on what rules the new government puts in place, but these reforms don’t go far enough to stabilize premiums,” Forgeron said Thursday during the AGM, held at Vantage Venues at the former Sun Life Financial building.
Limiting the amount of money a claimant can get for pain and suffering can lead to savings in claims costs, Newfoundland’s Board of Commissioners of Public Utilities said in a report released Jan. 29.
“In the statement of claim to the at-fault driver, they are just going to ask for more, to make up for the deductible,” Forgeron told Canadian Underwriter Thursday after the AGM. “I can’t tell you for certain that is going to happen, but the data historically shows that it leads to claims inflation.”
Pain and suffering damages are intended to compensate for the loss of enjoyment of life.
“Since the caps and deductibles do not impact other damage claims, an injured person would continue to be entitled to claim economic damages such as loss of income and rehabilitation expenses,” the public utilities board said in its Jan. 29 report.
Absent from the proposed reforms announced Apr. 15 is a cap on minor injury claims, with the government proposing an increased deductible instead.
IBC previously recommended a $5,000 cap on damages for minor injuries.