More Choice, but More Affordable?

The primary goal of auto insurance reform in Ontario is to give consumers more options, not to make insurance more affordable, James Cameron told an industry group at the Insurance Institute on May 17 in Toronto.

Cameron and Nicole Langley of Cameron and Associates, a Toronto adjusting and consulting firm, have been offering training seminars around the province in advance of the changes coming into effect on Sept. 1, 2010.

Although it isn’t clear yet how insurers’ pricing will respond to the reforms, the Financial Services Commission of Ontario (FSCO) has posted benchmarks or guidelines on its Web site for actuaries. The guidelines suggest a 30% reduction in the accident benefits portion of the premium as a result of the reforms, and a 26% increase in the bodily injury portion, Cameron said. So the reforms appear to be about something more than pricing and affordability.

This is where consumer choice comes in.

CONSUMER CHOICE

Under the new Statutory Accident Benefits Schedule (SABS), there will be a coverage limit of $50,000 (down from $100,000) for medical and rehabilitation benefits for non-catastrophic in- juries; there will be a $3,500 cap for minor injuries. Optional additional coverage will be available, but not for minor injuries.

As for what constitutes a minor injury, a new, interim Minor Injury Guideline (MIG) has been released. It replaces the Pre-Approved Framework Guideline for Grade I and II Whiplash Associated Disorders (WAD). Under the MIG, a minor injury is defined as a sprain, strain, whiplash associated disorder, contusion, abrasion, laceration or subluxation and any clinically associated sequelae (symptoms following and related to any of these listed conditions).The guideline does not apply, however, if the insured person or health practitioner provides “compelling evidence” of a pre-existing condition that prevents the insured from achieving maximal recovery from the minor injury.

Consumers do have the option to “buy back” up to their pre-reform level of standard coverage ($100,000) or higher ($1.1 million). Caregiver, housekeeping and home maintenance benefits will not be available under a standard policy unless the insured person has suffered a catastrophic impairment (CAT) or has purchased an optional benefit; these three optional benefits will be offered together and not separately. If optional coverage is purchased, the benefits will only be available to the insured and his/her spouse and dependents, but not to other passengers in the car, Cameron said.

The section of the SABS that requires the insured to elect between receiving income replacement benefit (IRB), non-earner or caregiver benefits has been changed. “The Reader’s Digest version of the change,” Nicole Langley said, is that “once you have elected one benefit, you can’t change.”

The IRB calculation will no longer be based on 80% of net income. Instead, it will use the simpler calculation of 70% of gross income, Cameron said. It will still be capped at $400 per week unless the insured has purchased optional additional coverage. Treatments or monitoring are to be provided in four-week blocks of time (three such blocks, according to FSCO’s interim MIG). This replaces existing caps of 12 weeks for WAD I and 16 weeks for WAD II.

Section 4(5) has been added to the IRB section, codifying the serious consequences of a claimant’s failure to pay income tax. If a person fails to do so, “the person’s income before an accident shall be determined for the purposes of this part without reference to any income the person has failed to report contrary to that act or legislation.”

An insured will be permitted to hire an accountant at the insurer’s expense to calculate an IRB. Accountants hired by the insurer and the insured must be licensed under the Ontario Public Accounting Act or equivalent legislation; their fees will be capped at $2,500 for each side for one or more reports.

Under the existing SABS, some claimants with collateral benefits have been overcompensated, Cameron said. The new SABS has sought to remedy that by clarifying that the auto insurer can take the benefit of collaterals.

The standard attendant care benefit for a non-catastrophic impairment will be reduced to $36,000 from $72,000, but optional additional coverage may be purchased. Only a registered nurse who has received special training or an occupational therapist will be permitted to sign a Form 1 for attendant care benefits. The new SABS also clarifies that an aide or attendant for a person may include a family member or friend who does not possess special qualification.

CATASTROPHIC IMPAIRMENTS

Under the current SABS, chiropractors and other regulated health practitioners, many of whom do not have the training or skills to make CAT determinations, have been completing the applications and sending them to insurers together with assessments costing up to $25,000, according to Cameron. The insurers have had to spend as much to respond and it has been a big abuse, Cameron said. Under the new SABS, the Application for Determination of Catastrophic Impairment may only be completed by a physician, or by a neuropsychologist in the case of brain impairment.

A claimant who is declared to be catastrophically impaired will be entitled to all prior expenses that would otherwise have been covered. Arbitration decisions have been permitting the claiming of the prior expenses, so it has been enshrined in the new SABS, Cameron said.

EFFECTS OF THE NEW SABS

In addition to the changes noted elsewhere, the new SABs will also have the following effects:

• interest on overdue payments will be reduced from 2% to 1%, compounded monthly;

• no rebuttal exams; and

• the treatment plans and applications for approval of assessment or examination will be merged into one process. Insurers will have 10 days to give notice of the following: the goods, services, assessments and examinations the insurer agrees to pay for; those things the insurer does not agree to pay for, as well as medical and other reasons why the insurer considers them not to be reasonable or necessary. The treatment plan must be signed by the insured.

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INCURRED EXPENSES DEFINED

A very significant change to the new SABS, according to Cameron, is the addition of a definition for “incurred expenses” related to goods or services such as housekeeping, caregiving, attendant care and funeral benefits. An insured person incurs an expense only if:

• the insured person has received the goods and services to which the expense relates;

• the insured person has paid the expense, has promised to pay the expense or is otherwise legally obligated to pay the expense; and

• the person who provided the goods and services did so in the course of his or her regular occupation or profession, or sustained an economic loss as a result of providing the good or services to the insured person.

After 1994, the courts did not require the use of professional caregivers in order for an expense to be incurred, an interpretation that favoured the insured over the insurer.

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EXAMINATIONS AND ASSESSMENTS

With respect to examinations and assessments, the new SABS provides for:

• no in-home assessments for minor injury;

• no more than $2,000 in respect of fees for any one assessment or examination;

• no payment for future care plan, life plan, or related assessments (These have been used in the tort claim, but paid for by the accident benefits insurer, Cameron said.);

• no limit to the number of assessments, but no more than are reasonably necessary;

• the cost of assessments requested by the claimant will reduce the medical and rehabilitation limit of $50,000.

The assessment cost maximums will apply to all assessments completed on or after Sept. 1, 2010 and will apply to both new polic ies and existing policies.