Uncovering the ‘hidden cost’ of no-fault insurance

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By Kirsten McMahon

recent survey commissioned by FAIR Alberta shows personal injury lawyers are not the only ones opposed to moving to a no-fault system — almost 60 per cent of Albertans polled still support the current, at-fault system. What’s more, very few respondents said they were familiar with the changes proposed by the province.

“The survey revealed only one in 20 people feel very familiar with insurance reforms in Alberta, which is disconcerting,” says Rhino Legal Finance President, Larry Herscu. “I think it follows a broader trend where those who are the most impacted by reforms receive the least amount of information.

“At the same time, I would urge drivers to take a more active role in order to make educated and informed decisions about their auto insurance policies,” he adds.

The Government of Alberta released Bill 41: the Insurance (Enhancing Driver Affordability and Care) Amendment Act, 2020 late last year, legislation it said would create a more affordable insurance system for consumers. “A report from an appointed panel recommending Alberta switch to a ‘no-fault’ insurance system was also released along with Bill 41,” states FAIR Alberta.

While Alberta currently considers moving away from its tort-based model, other provinces have varying degrees of no-fault systems in place. Although governments frequently tout no-fault insurance to reduce premiums and expedite payouts, drivers aren’t necessarily informed about the accompanying restrictions on their access to compensation for injuries sustained in accidents.

“It feels like everything costs more these days, so I understand how cheaper car insurance is attractive to consumers,” Herscu says. “But if you’re catastrophically injured in a motor vehicle accident, there may be costs you can’t recover because you lose your right to sue for damages.

“I’m not sure drivers fully understand the ‘hidden costs’ of reduced rates,” he adds.

Herscu points to British Columbia’s recently introduced no-fault insurance regime, which took effect on May 1, 2021. However, since the changes went into force, there has been a steady stream of news reports of accident victims who have fallen through the cracks.

A B.C. woman who was unable to work after a car crash highlights what she says is an “unjust” flaw in ICBC’s new no-fault insurance program.

The woman was rear-ended by an on-duty police officer in June, leaving her with whiplash and a spinal injury. Global News reports her injuries were severe enough that the self-employed registered massage therapist had to take two weeks off work and only returned part-time afterwards.

The woman told the news agency she got a “nasty surprise” in July when she learned that the Insurance Corporation of British Columbia (ICBC) would not cover one week of her lost wages and would pay out the remainder at 90 per cent.

Making matters worse, she told Global News she has been buried in red tape trying to prove her income from last year — which was already lower than usual on paper, due to pandemic lockdowns.

Earlier this year, a Vancouver pedestrian who was run over on a sidewalk says he may not be compensated for some medical costs, such as seeing a concussion specialist.

“I don’t see how I have to be out of pocket when someone jumps the curb and runs me over,” the man told the New Westminster Record. “If there was a cash settlement on the side, out of that I could make up the shortcomings of all these things on the side.”

Herscu says there have been several similar reports since the new system came into effect in B.C. “While the scenarios vary, the underlying message is clear — accident victims want to raise awareness about coverage gaps which they feel were hidden in the rollout of the new program,” he says.

Herscu praises FAIR Alberta for drawing attention to this lack of awareness through the recent survey and its continued advocacy work.

“The survey shows very few Albertans are familiar with the changes being considered by the government with only five per cent of respondents stating they feel ‘very familiar’ and another 24 per cent stating they feel ‘somewhat familiar.’

“When almost half of those polled say they are ‘not at all familiar’ with the changes proposed, it presents an opportunity for stakeholders to bring attention to the gaps and meaningfully communicate what it will mean for drivers,” Herscu says.

The FAIR Survey provided respondents with an explanation of both types of insurance at the beginning of the poll to gauge their initial reaction, comment on the perceived fairness of each system, and express their preference.

“When asked to restate their preference at the end of the survey, after being asked further questions about automobile insurance options, just under six in ten (57 per cent) still support an ‘at-fault’ system,” the survey states.

Herscu says new regulations for no-fault benefits can be complicated for the average consumer to understand. It’s only until they have to make a claim that they discover the bureaucracy that could lead to smaller payouts and little to no legal recourse.

“I think drivers deserve clear and transparent information,” he says. “We have seen this play out in Ontario and can’t rely solely on the government to treat accident victims fairly.”

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