There will be lots of attention on ideas such as yet another road-safety blitz and more penalties on bad drivers, as the NDP government ponders how to respond to ICBC’s financial crisis.
But the highest-impact idea is about changing the litigation model the public insurer has used since its inception in 1973. B.C. is the only jurisdiction left in Canada that hasn’t modified the expensive, adversarial, full-litigation model for handling vehicle-insurance injury claims.
Partly as a result, 24 per cent of ICBC’s total expenses are legal costs, incurred arguing with other lawyers representing claimants. The corporation pays more to all the lawyers involved than it does to the minor-injury claimants, who represent the fastest-growing sector of costs.
Attorney General David Eby on Monday ruled out going to no-fault insurance, where most damages are set without litigation, as a response to the grim outlook outlined in an independent Ernst&Young report.
But there’s a middle ground between the current model and no-fault insurance. It’s called the comprehensive-care model, where the focus is on caring for injured claimants, not just giving them money after contesting the amount. In some jurisdictions, it makes for quicker settlements and a greater percentage of benefits for the claimant, as opposed to the lawyers.
Eby expressed some interest in the idea, saying most people with claims feel obliged immediately to hire a lawyer, and changing that view is one of the more compelling aspects of the report. The review linked B.C.’s retention of the full-litigation model to the fact B.C.’s premiums are higher than in other provinces that have shifted away from that model. But even with relatively high premiums, they still aren’t high enough to cover the true cost of claims.
The previous B.C. Liberal government avoided the politically toxic move of allowing the 15 to 20 per cent premium increases that are required by intervening directly in the corporation. But minimizing the hikes (to 4.9 per cent last year, for instance) eroded ICBC’s financial situation to the point where it’s not sustainable, said the report. So a range of more dramatic moves is needed. It’s the litigation model where many of the savings can be had.
Among the many problems are the steadily rising costs of claims for what are technically called “minor injuries” or soft-tissue injuries. Shifting the focus would see ICBC paying for care and treatment faster, with less argument and more effective results, rather than contesting claims in court for long periods of time, then handing over lump-sum payments.
It could involve caps on amounts awarded for pain and suffering, and extended payments over years for ongoing care and treatments. The trade-off would be a significant cut in legal costs and disbursements.
Across Canada, the report found, it’s the category of minor-injury claims that stresses auto-insurance plans. With a finite amount of money available for settlements, most governments opt not to reduce damages for serious and catastrophic injuries, and target the minor sector instead.
Putting more emphasis on a care-based system (B.C.’s is now a mix, but more weighted to litigation) would make claims simpler and faster, and provide benefits that don’t depend on the quality of the lawyers’ work.
There are arguments that one-time lump-sum payouts create incentives to maximize claims, and force insurers to negotiate harder to keep payments down.
Continual payments, more or less on demand, for care provided until no longer needed would smooth out some of those issues. The downsides to the care-based model would be that it’s less flexible and adaptable to different circumstances and there’s less room to negotiate for greater benefits.
A variant would be to offer customers additional coverage for an extra premium to allow for full litigation of any claims.
Most of the concepts in the report involve the corporation spending even more money to get out of the jam it’s in. But with a half-billion-dollar loss last year and most options curtailed, there is no more money.
The government itself might have to fund some of the required changes, which would amount to giving back the dividends the Liberals started taking from ICBC in 2010.
