In a move to prevent rate hikes at the Insurance Corporation of British Columbia (ICBC), the B.C. government will be placing an upper cap on claims for minor injuries in automobile accidents at $5,500.
This rather controversial cap which kicks into effect by April 1, 2019, seeks to protect the province’s auto insurance monopoly structure is touted by analysts, lawyers, and health care advocates as one that could penalize auto crash victims who are in need of cash.
The average claim for minor soft tissue injuries in the British Columbian province has gone up from $8,220 in 2012 to $30,038 in 2016. Of that amount, pain and suffering receives $16,500 in compensations with wage loss, medical costs and legal costs sharing the rest. This has led to the province placing a cap on the ICBC’s ‘pain and suffering’ payouts to limit how much an accident victim can receive.
In a statement, Attorney General David Eby explained that the reforms are in place to rescue the Insurance Corp. of B.C. from its worsening financial crisis by limiting what an auto accident victim can receive in pain and suffering compensations.
He said, “ICBC was created to provide affordable insurance to all B.C. drivers, but years of reckless decisions by the previous government have thrown the corporation into financial chaos. Today we start making the tough decisions that will stem ICBC’s losses, keep insurance affordable and provide enhanced care for people injured in automobile accidents.”
British Columbia is the last Canadian province that runs a purely litigation based insurance model, and the last to apply a cap to on minor injuries compensations. These reforms will see a cap put only to the pain and suffering payouts, without affecting compensations for wage loss, legal costs, and medical care. The cap of $5,500 is lower than those of Nova Scotia, New Brunswick, Newfoundland and P.E.I.; but slightly better than that of Alberta which is placed at $5,020.
Mild whiplash, sprains, cuts and bruises, aches and anxieties all fall under the minor injury categorization so long as they do not persist beyond 12 months. The prerogative for the determination of minor or major injuries will remain with the doctors, not ICBC.
In cases of a dispute, though, an independent dispute resolution system will be adopted. This system is designed to resemble a Civil Dispute Resolution tribunal currently in British Columbia which handles small scale strata disputes.
The ICBC proposes an increase to the benefits victims can access for wage loss, rehabilitation and health care costs – benefits which have remained stagnant since 1991 – in order to offer compensation for the limited pain and suffering compensations.
As part of the reforms the ICBC will adjust its payment structure to cover the full costs of most treatments, also increasing the number of pre-approved treatments to now cover therapy, counselling, acupuncture, chiropractors, massage and a range of other care and recovery programs. These payments will now be provided as they occur rather than as a lump sum cash to cover all treatments.
Beyond protecting the ICBC from spiraling financial issues, Eby claims the cap will also prevent a hike in insurance costs by at least $400 which would likely have been suffered by drivers, following a 6.4% increase in insurance rates last November.
These recent reforms are in response to a report by Ernst & Young commissioned by the ICBC in 2017 which highlighted how the ICBC could become profitable again by freezing rates for the next five years and placing a $4,000 – $6,000 cap on pain and suffering claims in minor injuries.
Although those projections project that such a cap would allow an increase in lifetime benefits to as much as $600,000, the ICBC under its current proposal seeks to only double those benefits from the current $150,000 to $300,000 – retroactive to any claims from Jan. 1. Eby explains that although this might seem little, the ICBC is keeping their projections “conservative,” with the potential to increase benefits should the ICBC become profitable in the future.
Eby notes that “this initial set of changes is just one of many different reforms we are bringing forward.” Ultimately, “the savings are estimated to be projected at about $1 billion at ICBC” a move that will definitely be a step away from the unprofitable model the ICBC has run for years.
Despite the potential benefits of the reforms, it has not received all-round approval. Trial Lawyers Association of B.C. CEO Shawn Mitchell has described the policy as “ill advised,” and designed to throw British Columbians’ rights “on the ICBC dumpster fire.”
In similar fashion, the Canadian Bar Association B.C. brand president Bill Veenstra suggests that the move would be placing the burden for ICBC’s financial woes “on the shoulders of innocent victims.”
With ICBC’s sustainability taking a hit following the artificial maintenance of insurance rates by the liberal government over the past years, the reforms are considered a necessity if the ICBC is to rise above its current catastrophic downfall.