The case for caps
By Karin Ots | May 18
 We’re in the business of providing peace of mind.
In the simplest of terms our customers expect to be protected against loss—and for the most part we deliver. But what many insurance customers don’t realize is that, collectively, in association with various governing bodies, we help maintain the sustainability, affordability and stability of the insurance product.
Recent court decisions
A cap on minor injury awards resulting from auto accidents is good for both the insurance industry and our customers. As bodily injury claims have long been a driver for higher claim premiums, caps are a fair and sensible way to manage the sustainability of auto insurance—they keep insurance affordable for the majority of Canadians, while still supporting fair compensation to accident victims.
We feel that Justice Goodfellow, of the Supreme Court of Nova Scotia, got it right in his January 2009 ruling, when he upheld the cap on minor injury awards—and we’re proud to have played a part in the case. At Aviva Canada we’ve continually made efforts to promote and protect capping across the country.
Putting a value on pain and suffering is not easy and we shouldn’t fool ourselves into thinking there is a “right answer.” However, by determining parameters for pain and suffering awards, as an industry we take the burden off our legal system and create a level playing field for everyone involved.
We also agree with the direction of the provincial governments—that the most seriously injured should be our number one priority and that they should receive as much compensation as economically feasible. Combine this with their focus on increasing accident benefits to include all persons regardless of fault and it highlights the need for a cap on minor injury awards. Those that suffer minor injuries are not shut out – in fact their access to increased accident benefits far outweighs the so-called ‘handcuffs’ of a cap.
Why caps work
Opponents to the cap for minor injuries, predominantly those in the legal community, will assert that caps are unfair for those that suffer injuries as it puts a value on the pain they endure. Yet, without a cap, we would suffer through a bogged down legal system with numerous minor injury cases before it. Add to the increased legal bills, rising awards for minor injuries and the result will be higher auto insurance premiums for all consumers.
Since 2003, when the cap was introduced in Nova Scotia and New Brunswick, Aviva’s rates have dropped approximately 30% and 27% respectively in those provinces. And yet we have still been able to achieve our target return on equity. While the cap was in place in Alberta between 2004 and 2008, we reduced our rates by 10%.
Those that criticize often state that insurance companies are simply “lining their already fat pockets.” While insurance companies do make a profit, it should be clarified that the majority of our profits come from knowing how to invest. In fact, the auto insurance product is one of the least profitable lines—and is often subsidized by other, unregulated, lines of business.
When we look back to the general principle that insurance is designed to protect the masses from loss, the capping of minor injury awards does this by ensuring the affordability, sustainability and stability of the insurance product while continuing to allow for the support of accident victims that suffer minor injuries.
By Karin Ots, senior vice president, Injury and Casualty Claims, Aviva Canada Inc.
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