B.C.’s move to no-fault

British Columbia’s publicly-owned auto insurer is moving towards a no-fault auto insurance system.

The Government of B.C. announced in February that it would be “removing lawyers and legal costs from the system,” with few exceptions, in a bid to reduce public auto insurance rates by 20% (or $400 per driver). At the same time, maximum care and treatment benefits for anyone injured in a motor vehicle crash would increase to at least $7.5 million – 24 times higher than today. The changes would take effect by May 1, 2021, if the proposed legislation passes.

“You shouldn’t need a lawyer to access the benefits you’ve paid for,” B.C. Attorney General David Eby said Feb. 6, when the new system was announced. The government anticipates the move will reduce the Insurance Corporation of B.C. (ICBC)’s costs by $1.5 billion in the first full year alone.

The Insurance Brokers Association of B.C. (IBABC) hailed the move to the Enhanced Care system, saying it would result in “tremendous benefits” for consumers. “It puts the focus on helping crash victims get back to health without having to go through the court system, and on helping bring premiums to an affordable level for British Columbians.”

It’s certainly a debatable point. One P&C industry consultant, John McArthur, president of John C. McArthur & Associates, Inc., contends that the move to no-fault in Ontario did not achieve its intended purpose of lowering the cost of auto insurance.

McArthur was chair of the claims committee for Insurance Bureau of Canada (IBC) during the implementation of the no-fault Ontario Motorist Protection Plan in 1990.

The province’s trial lawyers are expected to challenge the NDP government’s initiative. According to the Trial Lawyers Association of B.C., the move to no-fault will reward bad drivers and represents a “deliberate taking away of the right of British Columbians to receive fair access to courts and fair settlement for those injured on our roads.”

The government counters that customers who have complaints or disputes about their claim, benefit payments, or fairness issues will have recourse through the Civil Resolution Tribunal (CRT), the B.C. ombudsperson, or the newly-created position of the ICBC fairness officer.

Brokers are being briefed on the details of the announcement. “I think brokers are genuinely interested in knowing how this will affect their workflow and what training and support is required,”  said Chuck Byrne, IBABC executive director and chief operating officer.

Byrne acknolwedged a downside for brokers when premiums are reduced by 20%. “Let’s face it: If premiums are going to drop that dramatically, broker incomes are going to drop as well, and that’s something we will be keenly interested in,” he told Canadian Underwriter in early February. “We have a significant amount of time to get up to speed and think through that. That’s certainly going to be the focus of our meeting with our members in the next few weeks.”

Why the no-fault model for B.C.?

“I’d heard rumours for months that they were going to introduce a no-fault product,” said industry consultant Willie Handler, principal at Willie Handler and Associates. “The reforms they introduced last year were not bringing down costs enough. On several occasions, ICBC and government representatives said, ‘If this doesn’t work, we’re going to have to try another model, and that model was no-fault.”

ICBC’s reforms last year included a minor injury cap of $5,500 for pain and suffering, an increase in accident benefits to $300,000, and the availability of the CRT to deal with less complex claims.

“Those were all well-founded and thought through and intended to bring stability in B.C., but they and other factors just aren’t going far enough fast enough,” Byrne said.

For Handler, a key figure in the evolution of Ontario’s auto insurance system, B.C.’s auto insurance monopoly seemed destined to become no-fault.

“I could never figure out why the government of British Columbia created a government-run insurance system [in 1973] to administer a tort-based product,” he said.

“It never made any sense. The only reason you would introduce government-run insurance is because you want to go into no-fault.”