Lower auto insurance premiums could hurt more than they help, lawyer says

Posted May 12, 2015

Critics of Ontario’s proposed changes to auto insurance say lower rates may not necessarily mean more money in your pocket.

According to the Personal Injury Alliance (PIA Law), the changes outlined in the provincial budget would shift the financial burden of accident-relate health-care costs from insurance companies to the taxpayers.

The PIA said the new changes would make it harder for people to get catastrophic injury status. And those who do suffer a debilitating injury would see their health-care funding slashed to $1 million instead of the current $2 million.

And the group isn’t alone in calling on the Ontario government to reconsider the proposed changes. A petition at Change.org has more than 16,000 signatures calling for Ontario’s finance minister to reverse the “unethical” changes.

Lawyer and PIA member Sloan Mandel calls it a “double whammy” to those who are catastrophically impaired.

A person is deemed catastrophically impaired if their disability affects more than half of their ability to function normally. The Ontario government is set to update that definition to help minimize disputes in the auto insurance system, said Kelsey Ingram, press secretary to the Minister of Finance.

The changes were part of the Ontario Liberals’ election platform last spring, when they said they would aim to reduce auto insurance premiums for Ontario’s 9.4 million drivers.

While the new changes would reduce premiums, PIA said they would also put more strain on taxpayer-funded systems, such as OHIP, the Ontario Disability Support Plan and Ontario Works.

The Ontario government said there needs to be more of a balance between what drivers are paying and what victims receive from insurance companies.

Ontarians who are injured in car collisions must still get the treatment they need, but they also need to pay affordable auto insurance, Ingram said.

Even with the changes, drivers will still have the option to pay for more coverage, she said.

A recent report suggested Ontario drivers overpaid on their auto insurance by about $840 million in 2013 alone.

The study – commissioned by the Ontario Trial Lawyers Association — said that’s because insurance companies have been ignoring the cap on the amount of after-tax profit they’re able to make from investments, called return on equity (ROE).

Ontario’s ROE cap has been set at 12 per cent, but insurance companies averaged 17.5 per cent as of 2013.

PIA said the proposed rate cuts won’t end up saving Ontario drivers money in the long run, as the government suggests.

If the changes go through, it would put those who are injured in a motor vehicle collision at risk of “financial ruin.”

Ralph Burwash, whose wife was left with a catastrophic injury after a collision in 2007, said he worries about how these changes would affect future accident victims.

Ralph’s wife, Joanne, has a mild traumatic brain injury that causes a pain that runs from her neck down her right arm, back and legs. It’s also hard for her to think clearly or process information.

The couple had $2 million in insurance coverage, but that money is almost gone now and they’re doing without many of the services Joanne used to have. Burwash has taken to caring for Joanne and their 10 kids on his own, which meant giving up their family business.

“We’re on our own completely now,” he said. “We now have to pay out of our own pocket, and we don’t have the money.”

The PIA said the Burwash family is one of many that struggle once insurance funds run out.

Not only should the Ontario government put a stop to these changes, said lawyer and PIA member Troy Lehman, but the existing system is “entirely inadequate”

He added that people who need government funding to pay for their health care wait years to get any money.

While most people think a severe accident will never happen to them, when it does, Lehman said it quickly becomes clear there isn’t enough money to go around.

“We’re constantly telling our catastrophically injured people that they’re going to have to do without,” he said. “And if these changes go through, it’s going to be twice as bad, because half of the money for medical and rehabilitation and care would disappear.”

Ingram said Ontarians can comment on the proposed changes at the government’s regulatory registry before May 19.

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