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.
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