Automobile Insurance Reforms 2011
The automobile insurance reforms 2011 (the reforms) were unveiled on Wednesday, November 9, 2011. The legislative framework for the reforms is contained in the Fair Automobile Insurance (2011) Act, which was introduced in the Nova Scotia House of Assembly on Wednesday, November 9, 2011. The purpose of the reforms is to provide consumers with better coverage by and choice of automobile insurance, while maintaining a balance between fairness, stability, and affordability in the automobile insurance industry.
BACKGROUND AND APPLICATION
In 2011, the Government of Nova Scotia undertook an independent review of automobile insurance in the province. This review was conducted in consultation with the insurance industry, stakeholder groups, and residents of Nova Scotia. The province looked at cost analysis provided by the Nova Scotia Utility and Review Board. Recommendations were made and the reforms announced on November 9, 2011 arose out of those recommendations.
The new reforms announced are to be implemented in two phases: the first phase is scheduled to come into effect April 1, 2012. The second phase is scheduled to come into effect April 1, 2013.
PHASE ONE – EFFECTIVE APRIL 1, 2012
The first phase will see the following reforms:
Enhanced mandatory no-fault benefits
Section B benefits will be significantly increased:
|Medical and rehabilitation expenses
- Head of household
- Spouse of head of household
|Loss of Income
|Principal unpaid housekeeper
Prohibition of premium increase if no claim is made
Insurance companies will no longer be allowed to increase driver premiums if a driver reports a collision, but makes no claim for damages.
Assistance for volunteer fire departments
Automobile insurers will now have to pay a levy of $0.50 per vehicle insured in Nova Scotia, which levy will go towards assisting volunteer fire departments in covering the cost of responding to automobile collisions. The superintendent of insurance will collect the levy annually. The introduction of the levy will not impact the volunteer fire department's ability to make insurance claims for economic losses.
Review of auto insurance law
A review of the automobile insurance legislation and the related regulations will now be required to take place at least every seven years.
PHASE TWO – IMPLEMENTATION - EFFECTIVE APRIL 1, 2013
The second phase will see the following reforms:
Direct compensation for property damage (DCPD)
Insured drivers will now be compensated by their own insurer for property damage which results from an automobile accident caused by a third party. The insured driver will maintain the right to sue the third party for other damages in tort law.
Limited liability and new priority of payrolls for rental companies
Rental and leasing companies will only be liable for damages of up to $1 million in the event that a collision is caused by a driver of a rental vehicle. Any damages over and above $1 million will be the responsibility of the individual driver.
Also included in this reform is a new priority of pay rule which requires the insurance held by the person renting or leasing the vehicle to respond to any claim first, followed by the rental or leasing company's insurance. This requirement exists even if the person who rented or leased the vehicle was not driving the vehicle at the time of the collision.
Diagnostic and treatment protocols for minor injuries
Diagnostic treatment protocols will be introduced for those who have suffered from minor injuries as a result of a motor vehicle collision. This will allow the injured party to have direct access to physiotherapy and chiropractic treatment without first having to seek approval from an insurer or obtain a physician's referral. The implementation of the protocols will require new regulations. These regulations have not yet been introduced.
Optional tort product for minor injuries
One of the recommendations of the independent auto insurance review was to allow individuals to purchase full tort coverage for pain and suffering awards which would place their general damages outside of the minor injury cap even in the event that they suffered from minor injuries. At this time, the superintendent of insurance has developed a framework for this optional tort product. The framework is to be considered and assessed by the Utility and Review Board to determine pricing.
WHAT THIS MEANS TO YOU
The automobile insurance reforms 2011 will impact all automobile insurers, as well as drivers who obtain automobile insurance in the province.
From the perspective of the automobile insurance industry, the biggest change outlined in the reforms is the change to Section B coverage. The increase in both medical and rehabilitation expenses, as well as loss of income, have the potential to significantly increase payment amounts under insurance policies. Further, the introduction of DCPD will likely result in an increased number of claims made by your insured's directly for property damage. Taken as a whole, the reforms provide significantly more benefits to insured drivers than were previously found under the Insurance Act.
When the new reforms come into effect, take time to become familiar with the Act and its associated regulations. We are available to answer any questions or concerns that you may have with respect to these reforms, and how it may apply to your business.
Phase 1 reform (PDF)
Phase 2 reform (PDF)
The foregoing is intended for general information only. If you have any questions, or for a detailed list and background of our insurance practice group, please visit www.stewartmckelvey.com.