British Columbia’s public auto insurance provider is seeing a spike in costs as litigants rush to complete their claims before reforms, including a cap on payouts, take effect in April.
“We are so close to the April 1 reforms, but until then we are dealing with the old system and we are watching it collapse under its own weight,” Attorney-General David Eby said in an interview Thursday, after a new financial update showed the Insurance Corporation of British Columbia (ICBC) has posted a net loss of $860-million for the first nine months of the fiscal year.
Last year, Mr. Eby described the state of the Crown corporation as “a financial dumpster fire" and announced dramatic changes to rein in costs, including caps on payouts for minor injuries, increased premiums for high-risk drivers and tighter controls on auto-body repairs.
The provincial government passed legislation last spring to curb skyrocketing payments for minor-injury claims by capping settlements and limiting when accident victims can sue.
The province is the last in Canada to abandon a system in which victims can sue for any type of injury − known as a full tort system. For claims that are filed after April 1, settlements for pain and suffering claims for minor injuries will be capped at $5,500.
Mr. Eby said as the deadline for changes approaches, there is a push for settlements by claimants.
“There are a bunch of what I can only assume are increasingly concerned plaintiffs or lawyers trying to get everything they can out of the files they have on their desk before the system changes. I don’t blame them for that, but we are going to have to address this," he said.
It means that in addition to the April 1 changes, ICBC is going to have to turn down the taps on settlements for claims that are filed before the deadline.
Mr. Eby said the number of accidents has actually levelled off. What is driving the latest losses at ICBC are higher settlement costs, and he said changes are now being imposed to rein in costs under the existing system.
ICBC is now reviewing settlement offers that have been made by junior adjudicators, he said, and may withdraw offers that are deemed to be excessive. He also expects to announce a new policy to curb the use of expert opinions in court, which ICBC pays for.
Earlier this week, Mr. Eby’s ministry released an independent review conducted by the Legal Services Branch that found some of ICBC’s adjusters have been too generous.
“Although it is a very subjective observation, some ICBC adjusters, particularly but not exclusively on claims under $100,000, appeared to be willing to settle too readily at sums higher than would be expected and sometimes higher than the reserves suggested," the report found. "There were occasions when ICBC’s adjusters might have drawn a firm settlement line and stuck to it.”
The Attorney-General acknowledged he has been under pressure from trial lawyers and other interest groups to back down on the settlement caps, but he maintained the reforms are needed to rein in unsustainable insurance costs.
“It really burns me that these reforms we are doing now, could have been done five years ago. Everyone knew what needed to be done so long ago," he said. "It’s a difficult thing to walk into the Finance Minister’s office and deliver the message that ICBC is losing more money than we expected. But that’s easy, compared to delivering that message to British Columbians, who have to pay for it.”
To blunt consumer anger over the changes, the cap is being rolled out at the same time that ICBC is boosting benefits for lost pay and medical rehabilitation for all people injured in accidents − the first major improvements in auto-accident benefits in more than 25 years.