Turn in the Road

The second phase of reform to Nova Scotia’s auto insurance system is now in place, marking a significant product change over the past two years. After bringing in enhanced mandatory no-fault accident benefits and other measures in April 2012, the province has moved forward with its latest round of changes. These include diagnostic and treatment protocols for minor injuries, direct compensation for property damage and limited vicarious liability for car rental companies.

However, one key proposed measure was left out of the reform package – an optional tort product for minor injuries. The decision to defer this reform came in an announcement by Maurice Smith, Nova Scotia’s transportation and infrastructure renewal minister, during a speech on February 7.

The main reason for the deferral seems to be the complexity around offering consumers a full tort choice for pain and suffering awards for minor injuries, particularly in terms of education, claims costs and product pricing.

Nova Scotia’s decision to postpone the tort option was welcomed by the insurance industry. “Insurance Bureau of Canada (IBC) had continuously expressed to government that it would be prudent to abandon or, at the very least, delay its implementation until more research and development could be compiled,” notes Amanda Dean, the bureau’s director of external and government relations, Atlantic.

“Given the extent of change that industry and consumers have seen since the government started the reforms in 2010, it was a very prudent decision for government to make – and a decision that it made after much thought, research and listening to stakeholder concerns,” Dean says.

“There was a lot of feedback between the industry and the Nova Scotia government on the optional tort coverage, which I think prompted them to take another look at it,” says Gordon Murray, vice president of business development, Atlantic Canada for Aviva Canada. “Generally, the feeling from the industry was that the product may not be utilized to a great extent by consumers,” Murray adds.

DIRECT ACCESS TO TREATMENT

While the optional tort product is off the table for now, it’s green lights for the other auto reform measures. One of the most important changes is the diagnostic and treatment protocols for minor injuries, based on Alberta’s model, which was introduced back in 2004 for sprains, strains and certain types of whiplash-related disorders.

“The introduction of diagnostic treatment protocols for minor injuries will mean Nova Scotians who are injured in an automobile collision have direct access to physiotherapy and chiropractic treatment without waiting for approval from an insurer or a physician’s referral,” notes a fact sheet on the reforms, released by the Nova Scotia government.

“This reform is patient-focused and delivers better care sooner in order to promote healthier outcomes for automobile accident victims. Diagnostic and treatment protocols will promote consistency and quality of care for minor injuries,” the fact sheet adds.

Insurers and brokers say they support the use of consistent diagnostic tools and treatment programs for accident victims.

“Like Alberta and Ontario, this is a good example of tying treatment as part of mandatory accident benefits coverage to evidence-based and science-based practices,” suggests Karin Ots, senior vice president of regulatory and government affairs for Aviva. “Standardizing the treatment helps to mitigate against overutilization of health care services.”

“The diagnostic treatment protocols are a good thing for consumers,” says Karen Slaunwhite, executive director of the Insurance Brokers Association of Nova Scotia (IBANS). “Consumers will be able to access the right treatment at the right time, which will lead to improved health outcomes,” Slaunwhite notes.

“The reforms will better serve collision victims, and ensure they get the treatments that they need,” Dean suggests. “Because people with sprains and strains are going to have access to pre-approved, science-based treatment, they will get better quicker.”

She adds that insurers are “cautiously optimistic that the additional claims costs anticipated as a result of the reforms will not adversely affect the affordable price of auto insurance for all Nova Scotia vehicle owners over the long term.”

Insurers, brokers and claims adjusters have worked with the Nova Scotia government and health care practitioners to clarify the diagnostic and treatment protocols. A training session on the protocols was held March 20 by IBC, IBANS and the Nova Scotia chapter of the Canadian Insurance Claims Managers Association.

“Collaboration between insurers and health care professionals will be key to the success of the (diagnostic and treatment protocols) implementation,” Dean notes. “We’ve begun the conversation, and it’s clear that more is needed in order to ensure this product is implemented effectively,” she adds.

“Insurers will have to be compliant with the new timelines in the new diagnostic and treatment protocols,” says Rosalind Staples-Simpson, vice president, Atlantic for RSA. “One of the main changes brought forward is that an insured will no longer have to use their own private insurance before claiming under their auto policy,” Staples-Simpson reports.

CLAIMS QUESTIONS REMAIN

Nova Scotia’s government has released several bulletins on the changing regulations, including a service and fee schedule that sets out the authorized payments and treatment sessions for physicians, physiotherapists and chiropractors. But some say the new regulations need clarification when it comes to actual claims-handling.

“We still have some questions in terms of the definition of injuries, who will be the actual treatment provider and the role of injury management consultant reports,” states Carol Messervey, a senior casualty adjuster with Nova Scotia-based Marsh Adjustment Limited.

Despite the new treatment and diagnostic protocols, Messervey says she does not expect that the nature of claims adjusting will change drastically.

“I think it will be important for insurers to go back to the basics of loss adjusting,” she observes. “That means getting solid, accurate statements, conducting proper investigations and receiving good documentation on the nature of the injury and the treatment plan.”

“This (the new protocols) could possibly increase the volume of claims, but won’t affect the claims-handling process,” Staples-Simpson notes. “We view these changes as positive, as they should allow the insurers to assist injured people to receive treatment in a timelier manner.”

In terms of direct compensation for property damage (DCPD), this measure will allow insured drivers to deal with their own insurance company for property damages that result from an accident caused by another driver. The new system – which has been in place for several years in New Brunswick, Ontario and Quebec – is akin to a no-fault structure designed to streamline the claims process and get insured drivers money as quickly as possible. For other damages, drivers can still sue under the tort system in Nova Scotia.

“Consumers will work with their own insurer under DCPD to repair or replace their vehicle when involved in a collision and someone else is at fault,” Dean explains. “Given the program’s similarities to that of New Brunswick, a system that is tested in this region after years of application, we are confident that consumers will be well-served.”

Dean adds the industry also hosted training sessions on DCPD requirements in Nova Scotia that included comparisons to traditional tort application and fault determination rules. Insurers and brokers generally favour the introduction of DCPD in the province.

“This will be beneficial to both consumers and insurers because policyholders will deal with their own insurers for repairs to their vehicle, for loss of use of the vehicle, and damages to contents carried in the vehicle when the policyholder is not at fault for the accident,” Staples-Simpson observes.

“This means speedier settlements for policyholders as they are dealing with their own insurer, less litigation and subrogation activity and, ultimately, cost savings, which are reflected in premiums,” she notes.

Adds Slaunwhite, “These changes make a more seamless system for the consumer at the point of claim, especially for those who may not carry collision coverage.”

For the changes to auto rental and leasing companies, the Nova Scotia government has limited the liability of these firms to as much as $1 million, with damages above that amount the responsibility of the individual at fault. This reform applies to rental or leasing companies that do not offer the option to purchase the vehicle at the end of the lease, notes a government fact sheet.

The information also explains new “priority of pay” rules that further limit the liability of rental or leasing companies. Under the rules, insurance held by the person renting or leasing the vehicle (even if not the driver) will respond first, followed by the rental or leasing company’s insurance. This update reflects changes in other provinces, such as Ontario.

Sources contacted for this article say that changes to rental liability rules are in the early stages and have yet to be fully clarified by the Nova Scotia government.

For the Phase II reforms in general, while there are still some lingering questions about the details of bulletins and the interpretations of regulations, the general tone of the insurance industry response is positive.

“Auto insurance is a heavily regulated product,” Dean points out. “The Nova Scotia government saw fit to review and make these changes to its regulation. With that said, the manner in which government conducted the review… is one that should be emulated when any government looks to amend its product.”