Is no-fault auto insurance the panacea?
No-fault insurance is not a magic bullet that is going to solve the auto liability problem, but it can be helpful to insurers, provided that the coverage is not too generous, said the head of Canada’s largest property and casualty insurer.
“I think that the no-fault product for both car repairs and bodily injury can be a very effective product, provided that it is not overly rich, so as to invite third parties to take advantage of the richness of the product,” said Charles Brindamour, CEO of Intact Financial Corp., according to Canadian Underwriter.
His comments were made against the backdrop of recent media reports around reducing the rights of plaintiffs to sue in British Columbia for auto accidents. The CBC recently quoted Attorney General David Eby saying a full no-fault system is not something he is looking at, but something similar might be considered.
“I don’t think no-fault is a panacea to automobile insurance issues,” Brindamour said earlier this month when asked about no-fault in B.C. “It’s a calibrated one to get the job done. But far more important, in my view, is choice and private competition.”
What no-fault insurance means is that it does not matter who is found at fault; your insurance company will handle your claim and payout for damages and injuries to you. In other words, it simplifies the process of getting claims paid out no matter who is at fault.
The system also generally cuts out the cost of lengthy legal battles that use time and resources – all of which add up to higher insurance rates overall - because insurers have to spend more money fighting every claim. Some provinces do still allow injured parties to sue for pain and suffering, economic loss or both while others do not. Where this is allowed, it enables injured parties to recover losses beyond the limits of the policy.
But Brindamour said In B.C. motorists would get better outcomes with open competition.
B.C.’s NDP government does not plan to open up mandatory auto insurance to the competition. Supporters of public auto insurance have pointed to Ontario has an example of a jurisdiction where rates are still rising even though consumers have a choice. However, B.C. Liberals have recently started calling for an end to the Insurance Corporation of British Columbia’s monopoly.
In 1990, Ontario introduced a system that limited the right of plaintiffs to sue for non-economic losses. Reforms that took effect in the 1990s were expected to reduce the frequency of liability claims. But Ontario has the highest rates in the entire country despite having removed nearly all of the car accident victims’ rights to compensation.
“I think no-fault has very good characteristics, provided that the coverage offered to the drivers is commensurate with the actual needs of the drivers, as opposed to being overly generous, as we have seen historically in Ontario,” Brindamour said. “I think some of the reforms that are in the pipeline are ones where governments across the land are trying to take abuse out of the system and really right-size the coverage that is being provided.”