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Looking beyond B.C. tort system

No fault and privatization possible as costs outpace rate increases
By Laurelly Dale
March 24 2017 issue

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There is always talk in insurance circles about introducing no-fault or privatization. British Columbia is one of the few remaining unfettered tort systems in Canada, but monopolized basic auto insurance is no longer in the interest of the residents of B.C. The rise in the number of accidents and resulting bodily injury claims has jeopardized efforts to keep rates low, making the current system unsustainable.

The Insurance Corporation of British Columba (ICBC) is a Crown corporation and was created to provide affordable vehicle insurance and regulation. However, ICBC’s purpose has continuously been thwarted by rising insurance rates. In 2016 the British Columbia Utilities Commission was directed by the Liberal government to approve an auto insurance rate increase of 4.9 per cent. ICBC released its own statement forecasting an increase of 42 per cent by 2020. The latter is on trend, considering rates have increased approximately 32 per cent over the last five years.

Roads are improving; vehicles are safer, distracted driving campaigns have been implemented. So what is causing rising insurance rates? According to ICBC’s annual reports, bodily injury claims costs have risen significantly in the last four years. The severity of the claims coupled with the significant rise in the number of claims has grown 41 per cent, or $746 million of the total increase in ICBC expenditures of $1.3 billion, or 33 per cent.

ICBC was established under the NDP government in 1973 as non-profit. In the mid-1990s under the NDP government, an attempt was made to bring in a no-fault scheme. A Trump-like level of public backlash followed that included over 200 organizations such as the Coalition Against No-Fault. ICBC’s status was changed to “for-profit” (but revenue neutral) under the Liberal government and any profit was directed into the province’s repository, which has collected over $1.2 billion in the last five years. NDP critic Adrian Dix has been vocal about calling for an audit of the government’s financial interest in ICBC.

In 2016, the current government directed a third-party review to determine how to keep ICBC rates affordable. A preliminary report will be delivered by June 30, more than a month after the May 9 provincial election. It is in the interest of the Liberal government to maintain the “for-profit” status, which may explain the delay in the third-party review. Contrary to Premier Christy Clark’s assertion, it is simply not possible to keep premiums down without reverting to privatization or a no-fault scheme. In the event that the NDP government takes over May 9, it will either revert ICBC back to its non-profit status or transition into a no-fault system.

Given the surprising results of the most recent 2013 B.C. provincial election, which predicted an NDP government win by a large margin but resulted in a Liberal victory, I will not be forecasting the results. Regardless of who wins, ICBC’s prognosis for the next 2-5 years no longer includes an unfettered tort system.

The steps taken by ICBC are not enough. ICBC has dropped insurance for luxury cars and plans to focus on distracted driving prevention and reducing the number of claims.

A focus on the growth in the severity of each claim should be the priority. This is where the aftermath of case law hurts the most. A tug of war exists between the judiciary’s power to influence the cost of bodily injury claims and ICBC’s request to raise rates. People will not be able to afford the rate increases necessary to sustain the current system.

In fairness to ICBC, it has cut costs significantly since its audit in 2012. Yet, the 4.9 per cent rate increase is inadequate to keep up with damages awarded at trial, which in turn influence settlement agreements.

The goals of the tort system, specifically to deter those generally from engaging in negligent behaviour while operating a vehicle, are being overshadowed by litigants. Amounts paid to represented litigants are 50 per cent higher than non-represented claimants. ICBC made national headlines in 2016 when the B.C. Supreme Court ordered that it pay $350,000 in punitive damages for malicious prosecution in Arsenovski v. Bodin 2016 B.C.J. No. 400 (appeal pending). Further, reductions in the discount rate from 2014 for future heads of damage increased the value of a claim.

What then is the alternative? Various provinces have adopted private and no-fault schemes. For example, Ontario operates a private insurance and no-fault regime; and Saskatchewan has implemented a restrictive no-fault scheme.

As a starting point, B.C. should look to each for guidance on what works. Broad financial and policy reasons underlie each of the schemes, which would likely better protect the interests of residents in B.C.

ICBC’s raison d’etre does not match the reality. Residents of B.C. are paying some of the highest premiums in Canada. The rising rates cannot keep up with the growth in the severity of claims. Regardless of political allegiance, the current auto insurance tort system in B.C. will soon go the way of the wooly mammoth. What formation the system takes will depend largely on who wins the election this spring.

Laurelly Dale is a civil and criminal litigator practising in Toronto and Kenora, Ont., with Dale Legal Firm:  www.dalelegalfirm.com. She was previously an employee of the Insurance Corporation of British Columbia (ICBC).  At the time this article was written she was an employee of LexisNexis Canada Inc. The opinions expressed are her own and do not reflect those of LexisNexis or ICBC.

This article has been revised from a previously published version.

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