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HomeMy WebLinkAboutClinton News-Record, 1987-04-29, Page 27CLINTON NEWS -RECORD, WEDNESDAY, APRIL 29, 1987—Page 7A Insurance brokers believe reform is inevitable BY PATRICK RAFTIS Just about every aspect of the ,automobile insurance industry in Ontario has come under scrutiny in the past several months. The provincial New Democratic Party is calling for tighter government control of the industry, customers are demanding lower premuimsa and a reduction in the rates charged to drivers in "high-risk" classifications. Those involved with the in- ' surance industry have also indicated some unhappiness with the current state of affairs. Reform, it seems, is inevitable. The main question now is, what form will new insurance regulations take? Basically, the government and the in- surance industry are considering three dif- ferent options for providing automobile liability insurance to Ontario motorists. PRESENT SYSTEM A random sampling of area insurance brokers indicates most feel it is unlikely Ontario will retain the current system of providing coverage and determining premiums much longer. "This (insurance brokage) is a difficult business to. be in right now, because it seems like the rates are going up twice a year. It's not the companies who take the heat for that, it's us," said Jean MacEwan, of Peter S. MacEwan Insurance Brokers. "For that reason, I certainly think some sort of reform is neccessary, although L don't neccessarily mean 'no fault."' "I expect there will be some sort of change, although I can't say exactly what kind," said Jim Mulhern, of Lyons and Mulhern Insurance Brokers. "They seem to think that it's going to be some sort of 'no fault,' as the answer. If the situation ( settlements and premiums) is going to continue to escalate, then the government is going to have to take a look at it." Len Theedom, of Clinton, Public Rela- tions Committee Chairman for the In- surance Brokers Association of Ontario saysr'reform in the system of determining premiums will probably occur because the present method, based on sex, age and marital status of the driver is "socially unacceptable". "Right now – with this so-called 'adver- sarial system' – the way premiums are collected at the present time, for the given conditions, the current method of doing it is the fairest; looking at driver experience, and distance travelled and other factors. "But, once premiums start getting high, it doesn't become socially acceptable to use our present methods (of determining premiums)," he said. However, he warned, a change may not benefit all drivers equally. "If it comes down to it, that we can't use sex, age and marital status, then the premiums payed by young drivers are go- ing to drop, while the premiums of older, more experienced drivers will go up," he pointed out. The present system of determining liability and damage awards, says Theedom, has so many built in legal costs that it results invariably, in high premiums. "The present system that we have is based on the Common Law system. It's an adversarial system and it says that the driver in an accident is responsible for damages to the extent that he was negligent. Likewise, the victim is compen- sated to the extent that he was non-, negligent. "The problem with the adversarial system is that the actual decision about who is to blame, and for how much, can take years and years. There is a great deal of legal cost involved in deciding who's at fault," Total no fault automobile insurance is a fundamentally different method of com- pensation, according to information pro- vided by the Insurance Brokers Associa- tion of Ontario, which establishes for all in- sureds the right to recover losses from their own insurer. It takes away the right of an injured party to sue another driver for recovery of damages. There is no need for the injured driver to prove negligence on the part of another driver for damages to be recovered. No fault insurance does not automatical- ly mean a govenment insurance monopoly. The only true no-fault automobile in- surance plan in Canada is in Quebec, where lawsuits based on automobile acci- dent injuries are prohibited. Instead, peo- ple are compensated according to a schedule of fixed benefits. In Quebec, auto liability insurance is sold only by a govern- ment agency. Manitoba, Saskatchewan and British Columbia have government insurance monopolies. However, they all permit lawsuits for personal injuries. In those provinces, as in the rest of Canada, people injured in auto accidents are entitled to certain no-fault benefits, as are their dependants. However, there is no restriction on the right to go to court. Neither the idea of either government run, nor total no fault insurance is the ideal situation in the eyes of the insurance industry. Jean MacEwan said initiating a govern- ment run program would be a "gross er- ror," because "private enterprise can run things a lot better than the government." Theedom said taking auto liability away from private companies would reduce their activity and have a detrimental im- pact on the entire economy. "The loss is in the investment that com- panies make in real estate, bonds, school bonds, municipal bonds and eventually a loss of taxation because a lot of companies, especially in B.C., have pulled out," he said. As far as total no-fault is concerned, while it would cut down greatly on legal ex- penses, "it still takes away some of your rights," namely the right to sue, said Mulhern. "Hopefully, they don't go so far as to say that if if I'm in a wheel chair and can't work for the rest of my life; that I can't get some kind of settlement," through the courts, said John Banter, of Banter and MacEwan Insurance Brokers, another Goderich firm. MODIFIED SYSTEM "We rather hope that if they are going to do anything, it would be in the direction of a modified no-fault system," said Theedom. Theedom was referring to the so-called "smart no-fault" insurance system being advocated by the Insurance Bureau of Canada in a national television advertising campaign. However, he admits, even that type of system could not be implimented without government involvement. "Even 'smart no-fault' is going to have to be legislated by the government," he said. Insurance claims are designed to com- pensate victims for two types of losses. economic (lost wages, damage to vehicles, etc.) and non -economic (pain and suffer- ing, bereavement, etc.). Modified no-fault coverage would allow economic claims to be "settled speedily and on what they con- sider to be a fair basis," while victims would retain the right to sue for compensa- tion for non -economic, thus more discre- tionary, claims, said Theedom. While he said it is too soon to offer specific figures and formulas for deter- mining premiums under a no-fault or modified no-fault system, Theedom. did say they would result in a general reduc- tion of rates for all types of drivers. "It is a concept and I don't think anyone in the insurance business would be prepared to say, 'we've got the rates work- ed out and everything set to go,"' he said. "We're going to have to take the present situation that we have and relate that to potential costs of no-fault payments and take an educated guess as to what would happen on the compensation packages," he added. However, even under any form of no- fault insurance, driver premiums would. still vary somewhat, based on the type of driver involved. "There would have to be determining factors," Theedom explained. Criterion would also have to be developed to determine when a victim's losses go beyond the scope of basic no-fault coverage, and allow for litigation. Where that line is drawn, will have an important effect on how fair a new system would be in special cases. SPECIAL SITUATIONS "That's where it (no-fault) becomes ine- quitable, in Speria1 citnatinnc T mn-" person could have an impairment for life and it might not be considered a serious in- jury," cautioned Mulhern. Also yet to he "fine-tuned," said Theedom, i . the policy for determining premiums for drivers frequently involved in accidents. Most likely an individual ac- cident, involving strictly economic losses, would have no immediate effect on the premiums of the drivers involved. Premiums would only be raised if it was found rates for the entire category a driver is placed in were insufficient to cover losses. However, when a driver is charged with an offence such as impaired driving or dangerous driving as a result of the inci- dent, that driver might find himself moved to a different category, resulting in a higher premium. In addition to changing to a form of no- fault, Theedom believes a change in the Family Law Reform Act, which now allows members of a person's extended family (grandparents, etc. to sue for losses, would also improve the insurance situation. "As a first move, we need to change the Family Law Reform Act i a process Theedom believes is at least two years away ), then bring in modified no-fault. I think that would be more or less our answer to the whole thing," Theedom said. While the maintaining the present system, improved by "tort reform," would be the insurance industries first choice, Theedom believes a switch to modified no- fault is the most "socially acceptable" op- tion and the one most likely to be im- plimented in the near future. Arts and culture contribute to economy it's arts and culture. According to Statistics Canada, the arts and culture sector con- tributes two to three per cent of Canadian gross domestic product, an estimated $8 -billion. More often than not, what industry is forgotten when industries contributing ap- preciably to gross domestic product are listed. No, it's not the computer industry - HAVE YOU GOT YOUR COPY? Some Reader Comments: "Great Book - Send Me 10 More" "Couldn't Put It Down" "Our Teenagers Are Reading & Discussing It" "I Bought 20 For Business Associates" ...A collection of 175 Focus articles & Radio Programs by Bob Shrier The response to "Let's Think`For A Minute" has been beyond ex- pectations. 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