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CONTENTS OF THE JANUARY 2004 ISSUE
Vol.71(4)
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SPECIAL ISSUE AUTOMOBILE INSURANCE AND COMPENSATION REGIMES
Introduction
EVALUATED ARTICLES Le régime québécois d'assurance automobile sans égard à la responsabilité par Claude Belleau
La cessation de l’indemnisation du criminel de la route : une analyse constitutionnelle par Lisa Fournier
par Daniel Gardner
Automobile Insurance in British Columbia: Autoplan Turns Thirty by Denis W. Boivin
by Richard A. Derrig and Herbert I. Weisberg
COLUMNS
Automobile Insurance under the responsability of Rémi Moreau Modifications à la Loi sur l’assurance automobile : ce projet ne tient pas la route par Jacques Valotaire
Automobile Insurance in BC and ICBC by contributors of Insurance Corporation of British Columbia
ActuariAL CHRONICLE under the responsability of Groupe-conseil AON Partenaires adultes interdépendants : une nouvelle catégorie de partenaires en Alberta
CURRENT EVENTS under the responsability of Rémi Moreau
INSURANCE AND RISK MANAGEMENT under the responsability of Gilles Bernier Le positionnement stratégique de la distribution en assurance de dommages par Denis Gobeille
documentation CHRONICLE under the responsability of Rémi Moreau
Reinsurance under the responsability of Swiss Re Adapting to New Realities by Roman Lechner
Groupement des assureurs automobiles
The Quebec no-fault automobile insurance scheme is now 25 years old. Since the 1st of March 1978, compensation for bodily injury from an automobile accident has no longer been handled as a civil liability in Quebec. Automatic, fixed compensation for such damage is now handled by a public corporation, the Société de l’Assurance Automobile du Québec (SAAQ). Material damage is still covered by private insurers (Gagnon, 1997). Unique in its design, this insurance scheme was set up by the Quebec government after the Task Force on Automobile Insurance headed by Mr. Jean-Louis Gauvin published its groundbreaking report in 1974. The basic principle of compensation in Quebec’s automobile insurance plan resembles the spirit that guided the reform of health insurance and hospitalization plans in the early 1970s. The goal then was equal access by all citizens to compensation for individual losses associated with bodily injuries (Boyer and Dionne, 1987). With this form of universal no-fault automobile insurance, it is possible to offer coverage for losses at very reasonable premiums. Premiums are used to cover a pre-determined level of compensation; they need not be set to cover legal fees; and they are paid by all license holders. Individual misbehaviour can still be penalized under criminal law and any individuals who are not satisfied with the public compensation plan can still buy additional insurance from their private insurer. In other terms, the current insurance plan compensates individuals and does not meddle in the administration of justice by forbidding civil lawsuits. Members of the victim’s family may sometimes express obvious dissatisfaction with the punishment meted out to criminally guilty drivers, but the reasons evoked often have more to do with justice than with monetary compensation. Quebec’s universal scheme for managing social welfare by separating the compensation of victims from the administration of justice was set up in 1978, under the very courageous leadership of Mrs. Lise Payette, minister of Consommateurs, cooperatives et institutions financières, and Mr. René Lévesque, premier of Quebec. On that score, it is well ahead of several societies where private corporative interests are more of a governing force. I never hesitate to remind my students that, in a country as rich as the United States of America, more than fifty million individuals have no access to health and hospitalization insurance, because premiums are far too costly—though no doubt justifiable from an actuarial view point. To mark the Regime’s 25th anniversary, the editorial board of Insurance and Risk Management decided to publish a series of special issues on automobile insurance. This series follows a special issue in honour of the first twenty years of Quebec’s no-fault automobile insurance, published in 1998 in collaboration with the Cahiers de Droit. That issue contained two very pertinent articles on the Quebec plan, one by the Honourable Thérèse Rousseau-Houle (1998) and the other by Mr. Jean-Louis Gauvin (1998). It is now our intention to publish a series providing an overview of the different automobile insurance plans existing in Canada and abroad and considering various management problems related to road safety, compensation for damages, premium setting, insurance fraud, and market regulation. This issue is the first of that series. It contains five articles and two columns devoted to automobile insurance. Three of the articles and one of the columns concern the Quebec automobile insurance scheme; one article and one column discuss the British Columbia plan; and one article analyzes the determinants of compensation in no-fault coverage plans. The application uses American data and pays very close attention to the problem of insurance fraud. The first article is written by Mr. Claude Belleau, who was a member of the Task Force on Automobile Insurance headed by Mr. Gauvin. Mr. Belleau first describes how the current plan was adopted. It is interesting to note that the Quebec government, at the time, was faced with substantial increases in premiums, a problem that is now challenging several Canadian provinces. One of the main reasons for creating the Task Force was the need to understand why premiums were rising so as to find the least costly scheme for compensating victims of traffic accidents. As things then stood, legal proceedings dragged on much too long and left many victims without compensation, resulting in economic hardship for a number of families. Mr. Belleau also explains the motives for dividing the plan into no-fault insurance for bodily injuries and liability insurance for material damages. Mr. Belleau next describes the main characteristics of the current no-fault compensation plan. He reviews in detail the arguments then (and still) deployed in support of this form of compensation; he also discusses Mr. Marc Bellemare’s 1996 protest against the scheme as well as the position taken by the Quebec Bar in 2001. The Bar has suggested modifying the current law to allow victims of criminal drivers to sue them for additional compensation over and above that given by the SAAQ and to reduce SAAQ compensation paid to these same drivers. A working paper of the Quebec Liberal Party (2002) reiterates the same objectives; and, in July 2003, the Quebec minister of transportation declared that the present government would table draft legislation based on these objectives which were not really at issue in last spring’s electoral campaign (2003). Mr. Belleau considers the current government’s project dangerous, because, by creating different categories of victims, it would undermine the plans universality. He also discusses the disappearance of the clause on drunk driving from the text on collision insurance and the effect of direct compensation on insurance rates. The second article in this issue discusses the constitutionality of any reform of the current scheme which would be designed to prevent criminal drivers from receiving compensation. Mrs. Lisa Fournier opens her exposé with data which clearly situate the debate in terms of social costs. Her data show that, in 1999, only 313 drivers convicted for criminal traffic violations claimed SAAQ compensation—amounting to $14 M, or less than 2% of the total compensations paid out for traffic accidents. Fifty-three of these criminal drivers were repeat offenders; eleven of them injured 7 non-passengers whereas 42 others injured only themselves! The author next examines, in detail, the constitutional implications of compensating victims differently depending on whether or not they have been convicted of a criminal traffic offense. She argues that the draft reform proposing to refuse criminally convicted drivers compensation for loss of income would violate the right to equal protection under the law guaranteed by Canada’s Charter of Rights and Freedoms. She suggests restricting the modification to repeat offenders with a record of traffic violations. This, she ways, would be more in keeping with the spirit codified in Quebec’s Automobile Insurance Act. Saskatchewan has recently modified its law by introducing a clause similar to the one being proposed by Mrs. Fournier. Insurers operating in Quebec (via BAC-Quebec) are firmly opposed to the government’s proposed modification. In this issue, the column entitled “Ce projet ne tient pas la route” [This Project Is Not Road Worthy], reminds us that, prior to 1978, 28% of Quebec’s traffic-accident victims received no compensation at all, either because they were unable to prove the other driver’s liability or because the other driver was unable to pay. According to Quebec insurers, restoring the right to sue criminally convicted drivers would seriously disturb the current equilibrium, since victims of acts of negligence would also demand the right to sue. Quebec insurers also believe that insurance compensation should remain separate from the punishment of criminal drivers. It would perhaps be better to review existing penalties under the criminal code rather than to introduce monetary penalties under civil liability. Insurers also make a distinction between the criminal driver and his family. They wonder if it is socially acceptable to penalize those who depend on the offender: If the latter should suffer a permanent disability with no SAAQ compensation, the family would become a burden on society. A final point should be mentioned: There is no real proof that this type of approach will have a dissuasive effect on criminal driving behaviour. Studies cited in the literature often come up with contradictory findings on this subject, for liability insurance reduces the guilty party’s liability payments to the deductible. In the next issue, this point will be examined in detail. Daniel Gardner proposes an interesting analysis of Quebec’s current regime, comparing it to New Zealand’s no-fault plan which was set up in 1974—four years before Quebec’s (which was itself followed by Saskatchewan and Manitoba). He observes that the two schemes are somewhat similar in their compensation for monetary losses but that they differ greatly in their treatment of non-monetary losses. Quebec is more generous as regards the latter, probably because it is more influenced by North American practices, including those of the United States. The other two articles are concerned with British Columbia’s automobile insurance plan. Professor Denis Boivin provides a detailed analysis of this province’s universal insurance regime. Managed by a public corporation, the basic plan offers minimal civil liability insurance. Individuals can buy additional insurance on the private market or from the public corporation. As with the SAAQ, the public insurer plays several other roles besides managing compensations. It is responsible for road safety, for educating drivers, and for rehabilitating victims. The author makes a detailed review of the different forms of coverage offered by the insurer, whether it is a matter of tort liability, no-fault compensation or coverage for an uninsured, underinsured or legally immune driver. He also analyzes what impact a policyholder’s behaviour can have on his right to collect for damages. The column on the Insurance Corporation of British Columbia (ICBC) looks at the plan’s monetary aspects and at its success in reducing traffic accidents since 1998. Specific attention is paid to a comparison of the average insurance premiums charged in Canadian provinces. The table clearly shows that, in the three Canadian provinces that run no-fault liability regimes, policyholders pay significantly lower average premiums than those in other provinces. Unfortunately, it is not clearly indicated that the premiums in question provide protection against large liability coverages: on the order of $2 M (Consumer Association of Canada, 2003). The relative spread does however remain the same for lower protection. Messrs. Richard Derrig and Herbert Weisberg give a detailed analysis of the monetary compensations granted in a no-fault regime for bodily injury caused by traffic accidents. The amounts of compensation studied cover the direct costs of salaries and may take into account costs related to pain and suffering. In many American states, the final amount of compensation is negotiated between accident victims (or their representative) and insurers. The seriousness of the injuries is of course a preponderant factor in settling on the amount paid, but other factors, such as the negotiating power of the parties involved, can also play a role. For the last ten years, insurance fraud has been suspected as a determining factor in cases of bodily injuries linked to traffic and work accidents; the same holds true for material damage. The authors add to the existing literature by finding that insurer’s suspicion of fraud in a file can reduce the compensation paid. This type of finding is very encouraging for insurers who want to fight insurance fraud by introducing detection mechanisms based on efficient statistical analysis (Dionne, 2000). References Association des
consommateurs du Canada/Consumers’ Association of Canada (2003) « Review of
Automobile Insurance Rates », 28 p. The author thanks Claire Boisvert, Martin Lebeau and Rémi Moreau for their help
Le régime québécois d'assurance automobile sans égard à la responsabilité par Claude Belleau
While the automobile insurance is in crisis in many Canadian provinces, the Québec scheme presents itself as a model to follow. This paper relates the genesis of the Québec scheme. It also shows that, despite the challenge of the no-fault principle, the staterun no-fault insurance system for bodily injuries fully compensates the losses sustained in car accidents by the great majority of Quebecers and that the private scheme of compensation for property damages based on tort liability has come to a great stability to the satisfaction of motorists. Keywords: Gauvin report, staterun and private scheme, no-fault automobile insurance, right to sue criminal motorists, pain and suffering, direct compensation, intentional fault, public order, tariff setting.
La cessation de l’indemnisation du criminel de la route : une analyse constitutionnelle par Lisa Fournier
The subject of whether criminals of the road should be compensated has been criticised a great deal over the last few years. Before the election of Mr. Marc Bellemarre as Minister of Justice, he was making representations to modify the Automobile Insurance Act. His objectives were twofold: first, to deny « criminals of the road » access to compensation by the Société de l’assurance automobile du Québec (SAAQ) and second, to allow victims the possibility to sue the individuals responsible for their injuries. The present study establishes that a legal provision that would deny compensation to a « criminal of the road » would go against the spirit of the Canadian Charter of Rights and Freedoms. The author’s belief is that such an exclusion to compensation would constitute a violation of one’s equality rights protected by section 15 of the Canadian Charter of Rights and Freedoms. Nevertheless, remaining aware and conscious of the objectives envisioned by the defenders of this approach, the author proposes in her conclusions a legal provision which might be both a possible and equitable solution. Keywords: Automobile Insurance Act, victim’s compensation, « Criminal of the Road », refusal to issue compensation to the « Criminal of the Road », constitutional analysis of the refusal, equality rights, protection against discrimination.
Quelques points de comparaison entre les deux plus anciens régimes intégrés d’indemnisation des victimes d’accidents d’automobile : Québec et Nouvelle-Zélande par Daniel Gardner
New Zealand and Quebec represent the two oldest pure no-fault plans, regarding automobile accidents. The present text first compares the compensation offered by the two schemes to the seriously injured victims. In this field, the advantages of the no-fault plans are obvious when compared to the traditional tort system. The second part is devoted to the sore point of both schemes : compensation for non pecuniary losses. The Quebec plan is offering, on that particular aspect, higher indemnities than New Zealand, which lead the author to wonder about the limits that should be applied when a no-fault scheme is implemented. Keywords : Automobile insurance, no-fault, comparative law, Quebec, New Zealand.
Automobile Insurance in British Columbia: Autoplan Turns Thirty by Denis W. Boivin
This article describes the five components of “Autoplan” insurance. This is the commercial name given to the universal automobile insurance regime that has been available in British Columbia since March of 1974. The minimum package comes with the following coverage: (1) third party liability insurance; (2) statutory accident benefits; (3) uninsured motorist protection; (4) underinsured motorist protection; and (5) inverse liability insurance. In closing, the article describes the main restrictions placed on recovery that relate to the conduct of the insured person. Keywords: Insurance, automobile insurance, Autoplan, no-fault, public insurer, British Columbia, third party liability, statutory accident benefits, inverse liability insurance, property damage insurance, restrictions on liability, exclusions.
Determinants of Total Compensation for Auto Bodily Injury Liability Under No-Fault: Investigation, Negotiation and the Suspicion of Fraud by Richard A. Derrig and Herbert I. Weisberg
Auto Bodily Injury Liability claim payments are predominantly negotiated settlements, with less than two percent the result of complete litigation and jury trials. All settlements consist of a combination of claimed economic loss, called special damages, and a payment for “pain and suffering”, called general damages. The dependence of the total compensation on a variety of factors relating to the type and magnitudes of the economic losses, medical and wage loss, and to the type and severity of injury has been explored by prior researchers who found medical losses to be the primary determinant of total compensation but they also found that other severity variables play a distinct and significant role in the final settlement values. Further research introduced the notion that both the information gathered in the course of investigation and the adjuster’s attitude toward the quality of the claim, especially the suspicion of fraud, also played a significant role in the final settlement value. Recently, it has been shown that settlement values for subjective injury claims are systematically lower relative to special damages and indicate that insurers use their negotiating power to obtain lower settlements on questionable claims as a rational response to the presence of fraud and build up claims. The current paper extends that research by examining additional variables specifically related to the investigation and negotiation processes and quantifying the effect of those variables on the final total compensation. In particular, we find that strain and sprain claims command lower general damages relative to specials, even in the absence of suspicion of fraud and build up, but that the intensity of suspicion of fraud and build up can reduce overall payments as much as 24 percent. For the first time, the negotiating effect of attorney demands enters the quantitative model in addition to the usual contingency fee. Finally, evidence that insurers are isolating low impact collisions and reducing the compensation through negotiation is explored and quantified. Keywords: Automobile insurance, general damages, fraud and build-up, negotiated settlements.
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Last updated:January 2004
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