There’s been some big news with ICBC lately: CEO Jon Schubert will be resigning and nearly 200 positions will be cut in the next two years.
That big news got me thinking about auto insurance and I want to share some information with you.
In B.C., there is a real danger that our auto insurance could change – for the worse – sometime in the future. The change is ‘no-fault auto insurance’.
So, what is ‘no-fault auto insurance’? I’ll explain…
Throughout North America, there are several different models of auto insurance. Those models can be divided into two systems:
- a liability/tort system; and
- a no-fault system.
The liability/tort system (which is what we have in BC) allows an innocent person to go to court and sue a reckless driver for losses (such as past and future income loss, past and future medical expenses, and pain and suffering) that the innocent party suffered in a motor vehicle crash.
In the no-fault system, innocent victims of car crashes cannot go to court and cannot sue for their losses. The reckless party is not brought to court. Instead, the innocent party is only entitled to pre-determined benefits that are decided BY THE INSURANCE COMPANY. It is a system similar to what occurs in Workers Compensation Board claims.
Quite frankly, no-fault auto insurance strips innocent victims of their right to sue and leaves them with whatever the insurance company is offering to pay, period. So, with that said, why have some provinces/states even experimented with no-fault auto insurance?
Well, insurance companies argue that no-fault insurance reduces premiums, making auto insurance cheaper. The premiums are supposed to be cheaper because the benefits that are paid out to innocent victims are significantly lower. Consider that in Ontario, when no-fault was introduced, benefits that were paid out to injured victims of car crashes were reduced by almost 50%.
So, with less (than fair) benefits being paid out, do premiums actually decrease? Are the savings actually passed on to the public? Answer: ABSOLUTELY NOT. In almost every province or state where no-fault insurance has been introduced, the premiums have (hugely) escalated.
Other than increased prices, no-fault insurance leads to an increase in crashes. Why does this happen? Well, under no-fault, reckless drivers are not sued and, as a result, are not held accountable for their actions. In Quebec, when no-fault insurance was introduced, fatal car crashes increased by nearly 10%.
Despite these negative effects, there was a battle in the mid-1990s in which the provincial government (to ICBC’s desire) was moving to change our auto insurance system. Fortunately, though, the change did not occur – there was a lot of opposition (as you can imagine).
Other provinces weren’t so lucky… Ontario introduced a no-fault system in the 1990s and, after seeing its failures, has reverted back to the tort system.
According to the Coalition Against No-Fault in British Columbia, there are over 200 organizations that are against no-fault insurance in B.C. Such groups include Mothers Against Drunk Driving, various seniors’ groups and student unions, the British Columbia Brain Injury Society, and the B.C. Trial Lawyers Association (who are keenly aware of your rights).
I wish I could go on, but this topic is HUGE – it is impossible to fully describe this issue in a short column.
But, in closing, I will say this: ICBC and other insurance companies are keenly aware that the term ‘no-fault’ conjures up negative feelings with consumers and with the public. So, if it comes up in the future (and hopefully it never will), look for insurance companies to use terms (for proposed policies) that conjure up ‘warmer, fuzzier’ feelings about such no-fault insurance.
BUT, don’t be fooled – you’ll still be paying more for less.
**The information contained in this column should not be treated by readers as legal advice and should not be relied on without detailed legal counsel being sought.
Originally posted on Castanet.net on August 21, 2012: Be afraid: No-fault insurance and ICBC.