Does Alberta have a better way to reel in payouts?
Alberta system supplies blueprint for reeling in ballooning payouts
Litigation is a “crazy expensive” way to resolve minor injury claims resulting from motor vehicle accidents, according to an Albertabased insurance expert.
Alberta is among the most recent converts to regulations that cap the value of claims for minor injuries, including pain and suffering, and until recently it has been working reasonably well, said Anne Kleffner of the Haskayne School of Business at the University of Calgary.
In 2004, the government there capped claims for soft tissue injuries — strains, sprains and whiplash — at $4,000, which was incrementally increased to $5,020 by 2017, a fraction of the average payout in B.C.
Personal injury lawyers in Alberta claim the definition of minor injuries — those that don’t result in serious impairment — covers 90 per cent of all injuries attributable to motor vehicle injuries. That leaves only 10 per cent of injuries eligible for settlement by litigation, mainly those with catastrophic injuries.
By contrast, in B.C., 51 per cent of injury claimants hire a lawyer to extract a settlement from B.C.’s public insurer, said ICBC board chair Joy MacPhail.
“A quarter of these claims already have a lawyer involved before they’re reported to ICBC,” she said.
The average payout for minor injuries in B.C. has risen from $8,220 in 2000 to $30,038 in 2016, an almost fourfold increase, according to an analysis by Ernst and Young delivered to the provincial government last year.
Pain and suffering claims due to minor injury are up to $16,500, from about $5,000, over the same period, said the report, which employs figures supplied by ICBC.
ICBC says the total annual cost of settling minor injury claims has ballooned to almost $1 billion, up from less than $300 million in the early 2000s. Total injury claims are now $3 billion a year.
A cap of $7,000-$9,000 on pain and suffering settlements could save the system $770 million, the report says.
ICBC is facing a $1.3-billion shortfall this fiscal year, according to Attorney-General David Eby, who has promised a suite of changes to address the corporation’s financial crisis.
“Prior to the cap, the average cost of pain and suffering claims for minor injuries (in Alberta) was climbing to $15,000, $20,000 and $25,000 for each claim, which given the frequency of those types of claims, was really adding to the cost of premiums,” said Kleffner.
Rather than paying people lump sums, Alberta channelled new resources into treatment for injury victims and compensation for lost income.
“The system has been working very well in Alberta, to be honest,” said Kleffner. “The idea is to make sure that the people who are more seriously injured are compensated appropriately.”
A constitutional challenge to the new regulation failed.
“Increased medical benefits under the new legislation were felt to outweigh any benefits removed for pain and suffering,” according to Ernst and Young.
Insurance premiums vary dramatically in Alberta, based in part on factors such as age, gender and marital status. ICBC doesn’t take those factors into account when setting rates.
Personal injury lawyers claim the definition of “minor injuries” is overly broad, denying deserving people access to the courts.