Current government responses, and their inadequacies

Posted on February 23, 2002 by urbanrenaissanceinst

John Sewell Presentation
TDRC Reports
February 23/2002

I’ll talk on three issues: how the housing problem got here; government programs to serve the homeless; government programs to resolve the problems. Then will make a few concluding remarks.
1. Toronto and housing policies over the last twenty years
Housing costs have been on the rise for more than half a century. Until 1950, it was assumed a household should never pay more than 20 per cent of its incomes for housing. In the 1960s that rose to 25 per cent. In the late 1980s that rose to 30 per cent. There are lots of rumours it will go up to 35 per cent. In fact in Toronto, half the tenants pay more than 40 per cent of their income for housing, and a third pay more than 50 per cent.

Just by way of comparison. It’s generally said that in Italy a family pays 10 per cent of income on housing – which accounts for the fine way Italians dress, and the spectacular food they eat in restaurants. There are better ways of spending money than on the mortgage or the rent, but we are not a country which has yet learned that lesson.

As costs have risen, people in the middle have scrabbled to find places to live that they can afford. They ended up competing for the same houses that were priced at the low end of the market, driving up those prices considerably. Often these houses were occupied by those households with very little money – sometimes as rooming houses, or flats where bathrooms and kitchens were shared – and those people were evicted.

That’s one of the pressures that has created so much homelessness: the cheapest housing has been purchased by middle income families and taken off the market. The poor have no where to go.

The other pressure was the closing of the mental institutions in the early 1970s. This was done in the name of compassion, but the closure of the institutions was not accompanied by supportive places for the mentally ill to live. As we know, many of those in jails are mentally ill. One institution was replaced another, for some people.

These pressures were countered by a powerful affordable housing program starting in the early 1970s. The non-profit and non-profit co-op program built thousand of units in Toronto – probably close to 75,000 during the next 20 years. The program was large enough to provide housing for those feeling the pressures just noted.

But like all government programs which provide subsidies for social goods, this one grew stale after fifteen years. Some people found ways to take advantage of the program, and drove costs through the roof. Prime Minister Brian Mulroney cancelled the federal program in 1991, and Premier Mike Harris cancelled the provincial program in 1995. Instead of replacing the program that was worn out with one that was new and cost effective, they did nothing.

The result has been that those pressured out of the housing they were living in have no where to go. That’s why we have homelessness. It’s not complicated. If the inexpensive housing is disappearing (it disappears by becoming more expensive) there is bound to be a crisis for those who need it. And there is.

2. Serving the homeless.

a) Hostels currently house about 5000 a night. Tracked over a full year, there are 30,000 different individuals. Some use the hostel system every night, some use it only occasionally when they can’t make a n arrangement with friends or relatives to sleep on a couch. About 8000 of the homeless are children. Cost is about $50 per person per night – a total of $250,000 a night, or about $100 million a year. City pays almost one third of this, province pays about two thirds.
By the way, this is a system in growth. The formal hostel system has doubled in the last ten years.

Other homeless sleep on the street (maybe 1000 a night) and another 200 in Out of the Cold. They too use government services such as Street Patrols (supported by public subsidy), social agencies, police, public health officials, and hospital emergency rooms. The real cost here is hidden, but is probably $25 per person per night – a total of $60,000 a night, or about $20 million a year.
On any given night there are about 6200 homeless people in Toronto, and about $120 million is spent on them each year. Probably about half the 30,000 different individuals – about 15,000 – account for most of the hostel use and those sleeping rough. If they could be dealt with, then the hostel system could shrink very very considerably.

Suppose we said we wanted to help resolve the housing problems of these 15,000 individuals. Say we decided to help them with their rent by topping up the $325 shelter allowance from welfare a further $500 per month so they would have $825 to pay each month for rent. The cost of doing that would be $90 million a year. We could solve most of the problem of homelessness for $90 million and still have $30 million left over to deal with the part we hadn’t yet resolved.

But as a society we’ve set up an industry to serve the homeless rather than solve their problem, so we aren’t taking the easy or smart way out. In my opinion it’s only common sense to give them good housing and save money rather than spending all this money blaming them for being bad citizens.

b) Supportive Community Program Initiatives.
Introduced after Colleen Bradshaw, federal Minister of Labour, was appointed in early 1999 to respond to the Report on Homelessness led by Anne Golden. The SCPI program was introduced in December 1999, and its purpose was to develop a `seamless web of services and supports that people need to make a successful transition from street to a more stable and secure life. It will also help in the development of long term plans to address the underlying causes of homelessness and to develop a preventative agenda.’ The program had a total value of $305 million over three years, or about $100 million a year across the country.

Toronto looked at how the program might be implemented in this city. About $53 million would be available here, or about $17 million a year. Staff studied the matter and nine months later, in September 2000, announced its plan for spending this money. Of the total available under SCPI, staff proposed (and city council agreed) that $21 million, or about $7 million a year would be used on housing. The hang-up was that it could only be used for transitional housing, not for creating permanent new housing, and monies could only be spent on projects that were shown to be sustainable after SCPI was over. This $7 million is a tiny sum compared to Toronto’s annual expenditure, which exceeds $5 billion. It was one ten-thousandths of one per cent.

The city then issued a proposal call for ways to spend the money. In July 2001, projects totalling about $11 million for repair and new construction were approved. As of today, about $3 million of this amount has been dispersed. A number of projects simply haven’t got off the ground. Total number of new places to live built? Less than 100.

Of course, more are in the construction phase. Within a year, probably another 200 places to live will be available, of which perhaps half could be called permanent..

The point is, this is not a winning strategy. We are doing very little to make is easier for the homeless.

3. Solving the problem.

It sounds simplistic, but the problem here is there isn’t enough places for people with very little money to live and call home. To solve this problem, we must create housing that people can afford to live in on a permanent basis.

Here’s what’s happening on this front.

a) The city has a program encouraging rental housing on city land, writing down property taxes for a number of years and forgiving various building fees. Some units will be built under this program – probably 200 or more within the next two years, and it will sort of be affordable as the city tries to ensure that provincial rent supplements attach to these units. For the city, this is a significant achievement, given all its other financial problems.

b) The federal government announced a new housing program late last year, spending about $700 million over five years on new rental housing, with a maximum subsidy of $25,000 a unit. The program requires contributions by each province, so it can’t be implemented until an agreement is signed. Quebec has signed such an agreement, matching federal funds, and will built 6500 units over the next two years.

Ontario has yet to sign its agreement, so no funds are yet available. When it does sign, it is expected not to contribute any of its own fund , but require contributions by municipalities and charities. The chance of any of this housing becoming affordable to the homeless is very small. In any case, the total number of units that could be built in this province under this program will not exceed 3000 over 5 years (that’s 600 units a year) of which less than half would be in Toronto. At best, expect Toronto’s rental stock to increase by about 300 units a year. This will only happen if the provincial government signs the agreement.

4. That, in short, is why there’s a big problem.

5. In conclusion, a publicly funded housing program is needed. The amounts of money required are sizable, and no private company can come close to meeting them. Until we elect governments which see their job as helping give everyone a reasonable life, we’ll see this problem increasing.

In the meantime, individuals do what they can – Out of the Cold program, shanty towns and sheds, acts of individual charity and kindness.
What we can’t do is give up. If we keep pushing and working away, things are bound to get better.

Thank you.
John Sewell

Posted in Housing | Leave a comment

Chapter 10: Direct democracy on trial

Posted on January 29, 2002 by Other News Sources

by Jeffrey Karp and Peter Aimer
The citizens-initiated referendums. When New Zealanders went to the polling booths on election day in 1999, some were surprised to be issued with a bundle of papers. Auckland University Press  January 29/2002

click here to view .pdf document

Posted in Electoral Reform | Leave a comment

Medicare debit cards

Posted on January 15, 2002 by Other News Sources

Lawrence Solomon
National Post
January 15, 2002

The Mazankowski report gives Klein an opportunity to support a health-care payment system based on medical savings allowances

Next Thursday, on Jan. 24, all of Canada’s premiers will gather together in Vancouver to act upon what the pacesetter among them, Alberta’s Ralph Klein, will have decided on Wednesday, Jan. 23 about the future of medicare.

Mr. Klein promises to act on the recommendations in “A Framework for Reform,” the newly released study of medicare prepared for him by Don Mazankowski and other members of the Premier’s Advisory Council on Health. If Mr. Klein acts decisively, as he has so often shown himself capable of doing, medicare as we know it – long waits for surgical procedures, needless visits to GPs, alienating experiences for those without connections – will be over. Medicare as it could be – empowering, responsive to consumers, economically efficient – will get a chance to show its superiority over the two-tier medicine practised in all other western countries.

The Mazankowski report – the first by a government agency to flatly reject top-down, “central planning” approaches that have perpetually failed – presents many alternatives, leading some to claim that it waffles on presenting solutions. But virtually all the Mazankowski alternatives eventually lead down one road – to a debit card based system of medical savings accounts. The premiers would do well to understand this system. MSAs can stop the premiers’ current trend to withdrawing the medical services available to Canadians, MSAs don’t require raising taxes, and MSAs are consistent with the Canada Health Act. The premiers have six billion reasons to like MSAs – that’s how many dollars they would save each year in primary care alone.

In coming to its conclusions, the Mazankowski report surveyed literally hundreds of studies, including one which proposed a debit card system of medical savings accounts for Canada’s public health system. This study, the only one based on Canadian data ever conducted that analyzed financing for a Canadian medical savings account system and quantified the resulting savings, was conducted by Milliman and Robertson, the international actuarial firm. Milliman and Robertson, as those in health care circles know, is famed for having solved the riddle, after many others had failed, of how to sustainably structure HMOs in the United States.

Under the Milliman approach to medical savings accounts, which the Mazankowski report is consistent with in all details, all Canadians would receive in their personal accounts an annual allowance from the government, initially based on age and sex. (This amount would be primarily available for routine doctors’ expenses – hospital care and other big-ticket items would continue to be covered by the current medicare system). The very young and the very old would receive larger allowances, to reflect their generally greater need for health care services, but all Canadians would receive allowances far larger than they ordinarily need to meet their annual medical needs. After the doctors’ bills for the year have been paid, and when a surplus remains (this would occur in three out of every four years, on average), the government would claw half of the surplus back, the other half remaining in the personal account to be invested and remain available, as needed, for uninsured medical services such as dentistry, prescription drugs and home care.

In the one year in four that doctors’ bills exceed the annual allowance, the patient would be responsible to cover a limited amount of what are called “corridor costs.” After those limited corridor costs have been paid, medicare would kick in again, covering subsequent costs for the balance of the year. The chart nearby provides examples of how much Canadians of different age and gender would receive under an MSA system and the maximum they would need to pay in a year after they have exhausted their annual allowance. This payment, which would not apply to the poor, could be paid for with savings from previous years’ allowances.

The debit card system manages the accounting, letting Canadians know how much they have invested from previous years’ savings and how much of this year’s allowance remains unspent. But the debit card system’s main financial benefit comes from tracking the costs of patients in poor health. Many of these patients, whose medical condition will always cause them to spend their entire annual allowance, and then some, have no ability, and thus no incentive, to save part of their annual allowance. To provide an incentive to save, in the process also saving money for the health care system as a whole, their annual allowance needs to be high enough that they, too, would obtain savings in three out of every four years.

The debit card system creates the data base that allows sick patients – a group that is disproportionately poor – to receive large allowances and healthy incentives, for example by seeing a GP instead of going to emergency for routine problems or by changing their lifestyles to avoid smoking, drinking or sexually communicable diseases.

Polling by the Angus Reid Group on medical savings accounts found overwhelming support among Canadians, both men and women, and particularly among the poor and the elderly. By a two-to-one margin, Canadians believe medical savings accounts, which let patients hold the purse strings, would make doctors more accountable to them, promote better health, and encourage Canadians to use the health system more carefully.

Apart from Mr. Klein, no Canadian politician has the gumption to implement sweeping medicare reforms, no matter how sensible they may be. But Canadian politicians do have the wherewithal to sign onto a good idea, once a precedent is set and they have plenty of company.

How Medical Savings Allowances Would Work
In dollars based on 1998-2000 estimated government health care spending
Child 30 years 55 years 75 years
male female male female male female male female
Health Care Allowance* $208 184 416 680 782 850 2880 3330
Corridor** 52 46 104 170 138 150 320 370

*The amount each Canadian would receive each year in health allowances, based on their age and sex.
**Should an individual exhaust the annual allowance, further medical expenses, up to the amount in the corridor, become the individual’s responsibility.
Any medical expense greater than the allowance and the corridor would be covered by government.
Source: Milliman and Robertson, 1998

Posted in Regulation | Leave a comment

January/February 2002: Crash

Posted on January 1, 2002 by Other News Sources

  Janice Mucalov
January 1/2002
The Information Service of the Canadian Bar Association

Is no-fault insurance a legislated crime against innocent victims who receive inadequate compensation, or is it a necessary social tool to curb rising auto insurance costs? Are lawyers justifiably outraged that their clients are being shortchanged by a flawed system and a powerful insurance company lobby, or are they clinging to an outmoded tort system that rewards no one but themselves? How you answer those questions probably depends on which side of the increasingly fractious line you stand between accident victims and insurers. There’s very little middle ground when it comes to no-fault — either you like it or you don’t, and many lawyers don’t. Ignited in 1974 when New Zealand became the first common-law jurisdiction to adopt a pure no- fault insurance scheme, the no-fault debate rages on in Canada and adds new combatants all the time. Newfoundland and Labrador has just announced that come spring, it intends to wipe out countless personal injury claims by passing new legislation introducing a modified no-fault scheme. The provincial bar is fighting those proposals that impair claimants’ rights. In Saskatchewan, which has had a no-fault compensation scheme since 1995, local lawyers backed by a powerful anti-no-fault coalition of accident victims are waging a campaign to reinstate the right to sue, and the opposition Saskatchewan Party has promised to scrap no-fault if elected. Quebec has had a no-fault system for decades, B.C. almost instituted one in 1997, Manitoba has one in place, and Ontario keeps shuffling back and forth on the no-fault see-saw. For its part, the Canadian Bar Association has made its position clear. At its annual meeting last August, CBA Council resolved to beef up a no-fault task force, emphasizing that its mandate is to establish the complete failure of no-fault compensation, present ways to combat its expansion, and develop a plan for dismantling no-fault schemes in provinces where they’re already in place. The battle lines, drawn for years, are hardening. As the rhetoric flies and anger swells on both sides, it’s hard to know whether no-fault really has failed, what its pros and cons are, and whether there’s any place for it in provincial automobile injury compensation schemes. What’s the real story behind no-fault insurance?

The rationale

No-fault schemes are desirable because they’re cheaper, governments say. They believe that no-fault is in society’s best interests to combat soaring insurance costs and rising premiums, which result from a growing number of claims and a poor return on insurers’ investments in a soft economic climate. Newfoundland is the latest province to argue the point. In October, the government released 51 proposals for automobile insurance reform, which include eliminating the right to sue for pain and suffering unless the injury is permanent and serious, and grafting a $15,000 deductible onto all pain-and-suffering claims. “If the restricted tort option were to be adopted, the government could mandate an immediate reduction in third-party liability rates estimated at 35%,” says Newfoundland Lands & Services Minister Walter Noel. “The insurance industry is warning that in the absence of such change, rates will rise dramatically.” But Jamie Martin, Past President of the CBA’s Newfoundland Branch and Chair of a joint CBA/Law Society of Newfoundland task force on automobile insurance, questions whether insurers really are in trouble. “Insurance companies are claiming financial problems down the road,” he notes. “But recent decisions from the Public Utilities Board [which determines insurance rates and increases in Newfoundland] show that rates aren’t increasing in any substantial way.” The joint task force is calling for a full-scale public hearing by the Board to determine if insurance costs and rates really are at risk, with the Board’s consumer advocate intervening on behalf of insurance buyers. The answers are important, because introducing no-fault could exacerbate rather than alleviate financial problems. In Saskatchewan, no-fault has led to a dramatic increase in premiums, says Hugh Harradence of Harradence Logue Holash in Prince Albert. A former President of the provincial CBA, he sits on Saskatchewan’s Joint No-Fault Committee with members from the province’s law society, CBA and Trial Lawyers Association. Harradence points to statistics showing that premiums effectively exploded by 40% in the first four years after no-fault was adopted by the province. And according to a committee report, administrative costs for Saskatchewan Government Insurance (SGI), the province’s monopoly government auto insurer, mushroomed by 25% — from $34.5 million before the introduction of no-fault in 1995 to $43.1 million in 1998. “It simply hasn’t worked,” says Harradence of the province’s no-fault plan. Over in B.C. in 1996, the former NDP government unsuccessfully tried to push through no-fault on the grounds that premiums and costs would otherwise spiral out of control. “The province paid $1.3 million to KPMG, who predicted that, without no-fault, there’d be a $2.4 billion deficit by 2001,” says Don Renaud of Campbell, Renaud in Burnaby, B.C., president of the Trial Lawyers Association of B.C. “But the reality is that they preserved fault and froze premiums for five years.” Near the other end of the spectrum is Manitoba, which when faced with potential premium increases, introduced its form of pure no-fault, the Personal Injury Protection Plan, in 1994, promising consumers annual savings of $50 million. But no-fault critics point out that the rates rose anyway, the promised savings didn’t materialize, and insurance increases in 1995 and 1996 were substantially the same as they would have been had no-fault not been adopted. And in Ontario, which has a threshold no-fault plan, “abnormal abuses” by insurers are putting pressure on increasing premiums, says Philippa Samworth of Dutton, Brock, MacIntyre & Collier in Toronto, president-elect of The Advocates Society. Claimants and insurers who disagree over the entitlement to Ontario’s accident benefits can obtain neutral third-party assessments through Designated Assessment Centres (DACs). “But the DAC process has become very costly, as high as $15,000 to $20,000 per patient,” says Samworth. “Insurers are spending far too much money on sending patients to doctors to be checked out for medical and rehabilitation cost claims.” Against this tidal wave of sentiment, however, stands one no-fault province that boasts an enviable financial record: Québec. A full 90% of Québec drivers pay just $142 a year in premiums for personal injury protection, covering accidents anywhere in the world — by far the lowest premium in Canada, less than half the equivalent portion paid in second-place Manitoba. That $142 premium has remained steady for the past 17 years. And B.C.’s new Liberal government has announced that its predecessor mismanaged the province’s government-run auto insurer, the Insurance Corporation of British Columbia (ICBC), resulting in a $150 million deficit for 2001 instead of the expected surplus. The new government warns that auto insurance rates will now rise 6.6% — which might have no-fault supporters clucking that B.C. should have gone no-fault when it had the chance.

Fairness

Still, even if costs are an issue, no-fault insurance shouldn’t be used to solve the problem, says Renaud. “If affordability is the problem, there are other solutions, like focusing on road safety.” Road safety initiatives and anti-fraud and anti-theft programs are known to help combat rising auto insurance costs. Where no-fault supporters say the system is cheaper and therefore benefits society, opponents say that a tort-based system is fairer and benefits individuals. For one thing, unlike no-fault, tort principles aim to fully compensate the injured for all their losses. In Ontario, for example, Samworth says the $15,000 deductible is a source of complaint among the plaintiffs’ bar. “It eliminates a lot of smaller claims,” she notes. “Even if you meet the verbal threshold [see sidebar], you won’t sue for, say, a $25,000 claim for general damages if you have to automatically reduce that by the $15,000 deductible.” In Saskatchewan, a claimant seriously injured while in graduate school, but who doesn’t have a record of regular employment, is likely to be treated as if she’d earned an “average” salary. Compensation doesn’t reflect the individual’s actual earning potential. Worse, with many no-fault provinces — like Saskatchewan and Manitoba — there’s no compensation and no right to sue for pain and suffering, a fundamental claim in a tort-based system. There’s no financial solace if you can’t pump iron at the gym anymore, or run your usual five kilometres a day, or swing those golf clubs like you used to. These are legitimate claims denied by no-fault, argues Renaud. “This is money for people’s health.” Québec is the only no-fault province where the amount of compensation comes close to tort awards for all levels of injury. Laval University law professor Daniel Gardner has compared the benefits for traffic accident victims under Québec’s no-fault plan with tort-based compensation — awards for the same injuries occurring in non-automobile contexts (such as ski accidents). “Dollar for dollar, no-fault is as good as sometimes even better than — the common-law tort scheme,” he concludes. He points out that if you take the current maximum non-pecuniary loss amount of about $270,000 in Canadian tort law — derived from a 1978 Supreme Court of Canada trilogy of cases — and deduct 25% to 30% for legal fees, you arrive at about $179,375, the ceiling for non-pecuniary loss under Quebec’s no-fault plan. Gardner refers to the “hidden costs” inherent in the tort system. “In theory, you’re fully compensated under a tort system, but in reality, that’s not the case,” he maintains. A capital lump sum must be invested to make up for the discount rate applied at the time of judgment, and the claimant then has to pay tax on her investment. But fairness isn’t just about money, counters Renaud. “It’s a very important access to justice issue,” he says. “The debate often entered into is between rights and rates. But justice isn’t a commodity. Tort rights aren’t a commodity. A fault system ensures fair compensation because you have access to the courts, where you have the right to be heard and to have your loss assessed based on common-law principles.” Harradence agrees. “No-fault is fundamentally unfair to innocent victims. It’s taken away people’s rights and replaced adjudication by an independent judge with an adjuster, who works for the insurance company that pays the benefits. There’s a huge conflict of interest there.”

The arguments

Unfair or not, an acknowledged advantage to no-fault is that victims usually receive compensation more quickly than under a tort system, because liability isn’t an issue. In Québec, according to the Société de l’assurance automobile du Québec (SAAQ), which administers the province’s no-fault program, the first income benefit cheque is issued on average 22 days after a claim has been made. “Compare that to a tort system, where the victim may not receive settlement for three, four or even five years after the accident,” says Gardner. But Renaud suggests that delays inherent in tort schemes can be addressed. “There’s nothing stopping the insurance companies from making advance payments to people,” he says. And insurers would be more inclined to cough up sooner if sufficient pre-judgment interest was awarded, he adds. “In B.C., since pre-judgment interest was abolished a few years ago, insurance companies have been much slower to settle.” Driver responsibility is yet another point of contention in the fault versus no-fault debate. In the same way that restaurants insured against fire burn down more often than uninsured restaurants, say the critics, no-fault insurance may actually foster bad driving. In Canada, the finger is often pointed at Québec. At least three major studies reported that the number of accidents with injuries jumped by anywhere from 26% to 29% in Québec in the first year after no-fault was introduced. Gardner, however, doesn’t believe that making drivers responsible for their actions leads to fewer accidents and fatalities (the “moral hazard” theory). “The possibility of being sued doesn’t stop people from drinking and driving,” he scoffs. “They’re concerned instead about not getting stopped for drunk driving.” Long-term statistics tell the whole story, he says. According to SAAQ, when no-fault insurance was first adopted by Québec in 1977, there were 1,317 road fatalities out of a pool of 3.1 million drivers. In 2000, the number of fatalities had dropped to 765, while the total number of drivers had increased to 4.5 million. “I’m not saying that road fatalities decreased because of no-fault,” explains Gardner. “The decrease can probably be attributed to other things, like the use of seat belts and better road safety programs. But you can’t say that no-fault leads to an increase in deaths and accidents.” In fact, says Gardner, there’s a causative link between no-fault systems and government encouragement of safe driving. The jurisdictions that spend the most money on road safety are no-fault, such as Québec, Sweden and the state of Victoria in Australia. “They have a greater interest in preventing road accidents, as they have to pay for everyone who is hurt.” A related issue is whether no-fault insurance penalizes good drivers while rewarding the bad. No-fault claims to be better for society than a tort system because all victims are rehabilitated. “But no-fault can compensate more people because it compensates bad drivers,” says Renaud. In Québec, drunk drivers receive the same compensation as innocent victims, unlike in B.C., where a driver at fault won’t succeed in a tort action. While members of a Québec bar task force are campaigning for changes in the province’s law to reduce the compensation for drunk drivers, Gardner disagrees. “I think all civil systems should put the focus on the victim and let the criminal system punish offenders,” he asserts. “The purpose of the civil system is to compensate the victim.” Then there’s the sticky issue of recovery. A recent study of more than 7,000 whiplash victims in Saskatchewan, published in the prestigious New England Journal of Medicine, found that people recover twice as fast in a no-fault insurance system than they do if they’re allowed to sue. The research compared claims before no-fault was introduced with claims afterward, when pain and suffering was dropped. One reason postulated for the findings is that under no-fault, some victims might feel that it’s not worth fussing about pain if there’s no financial return. But Harradence responds that the study has been widely criticized as being flawed. Recovery was equated with the date a claim was closed — this could simply mean that the person was no longer pursuing the claim, not that they were actually better. Also, SGI, which funded the study to the tune of $1.5 million, has been accused of interfering in the research. Renaud says that if insurance companies just followed the protocol recommended by doctors, people would recover faster. “But insurance companies like ICBC want to impose their own one- size-fits-all treatment protocol.” He recalls ICBC intervening with an aggressive treatment plan for one client by sending her off to the gym. It was later discovered that she had a disc protrusion in her lower back. “The gym was absolutely the wrong thing for her. If ICBC had just let her follow the protocol of her own doctor and have an MRI, the problem would have been detected much earlier and she’d have had a faster recovery.”

Shallow pockets

Another problem with the tort system is that it presupposes there are assets behind the defendant to back the claim. “It’s no good to nail someone for $3.5 million if he only has $1 million of insurance and a $500,000 mortgage on his house,” says Frank McKellar of McKellar Structured Settlements in Toronto. “Not everybody gets hit by Coca-Cola.” In his experience with auto accidents, which dates back to 1963, McKellar has found that no-fault, at least in Ontario, has doubled the number of victims who have access to financial benefits. Moreover, seriously injured victims receive more money on the whole than they would under a pure tort scheme. “We’ve been structuring more settlements for more money, so I’d think that has got to be better for victims.” McKellar notes that like tort compensation, Ontario’s no-fault benefits can be cashed out in a lump sum, and these payouts are often turned into structured settlements. “In my view, Ontario has rattled out a fairly good system over the last decade ‹ a combination of tort and a pretty rich no-fault scheme, which can be piled together in one pot and then cashed out and structured.” Bob Baxter of Baxter Structures in Toronto says he’s doing far more business now than before the introduction of no-fault insurance in Ontario in 1990. That’s partly because the concept of structured settlements is more understood and acceptable now, he says. But he also credits lingering claims covered by Bill 164, the “rich” 1994-96 predecessor to Ontario’s current scaled-back no-fault scheme. Under Bill 164 — sometimes called the “Rolls Royce of benefits” — claimants could recover up to $10,000 a month for life in attendant care if they were totally disabled with a brain injury (indexed to the CPI), along with medical/rehab costs of up to $1 million, and many other benefits. Baxter notes that claim values for catastrophic injuries aren’t very different post-Bill 164. “The numbers for the plaintiff are very similar,” he says, countering the argument that no-fault puts less money in injured victims’ pockets. If anything, Baxter says, what hurts plaintiffs’ final damage awards is legal fees. “There’s not much provision for lawyers’ fees when dealing with no-fault benefits,” he notes. Fees are only supposed to be considered with the tort aspect of a claim. In practice, if a claimant cashes out her combined no-fault/tort claim, she’ll typically receive a cash component and an annuity component, and the lawyer takes his fees from the cash component. “It would be good if the no-fault system could build in legal fees for the lawyers,” suggests Baxter, “rather than forcing lawyers to take them out of plaintiffs’ pockets.”

A compromise solution?

Admittedly, many members of the legal profession have a financial stake in keeping tort systems alive. “But lawyers are very resilient,” notes Harradence. After no-fault came to Saskatchewan, he simply switched his focus from automobile personal injury work to general litigation, like the 5,000 or so lawyers whom Gardner estimates also survived Québec’s change to no-fault. And it’s not just lawyers who oppose blanket no-fault schemes. While SAAQ says 82% of Québécois are satisfied or very satisfied with their no-fault system, numerous accident victims and victims’ groups elsewhere across the country complain bitterly about no-fault insurance. Still, most lawyers agree that no-fault has its place. Samworth, who’s been consulted on government legislation since 1985, sees advantages to both tort law and no-fault insurance. “You cannot have a really good auto insurance scheme without some sort of no-fault,” she concludes. “It allows accident victims to recover early accident benefits. “The most sophisticated schemes are hybrid,” she adds. “It’s the fairest combination of access to some benefits for no-fault, mixed with the opportunity to sue for innocent victims.” To help contain costs, a small deductible could be set — perhaps $5,000, as proposed by Saskatchewan’s Joint No-Fault Committee. “This would help keep insurance costs down, as it eliminates smaller claims, and the majority of claims are smaller claims,” says Harradence. Finally, Renaud points out that efforts should be directed at preventing traffic accidents and injuries — the root cause of insurance costs and claims — rather than blaming tort-based insurance schemes, and the lawyers who represent victims. Janice Mucalov is a lawyer and freelance writer based in Vancouver.
Understanding no-fault

Automobile insurance law, and the resulting compensation for accident victims, has developed under common-law tort principles — allowing an injured person the right to sue the driver or party who caused the accident. In contrast, no-fault insurance schemes compensate all victims, regardless of fault. “No-fault is based on community responsibility, tort law on individual responsibility,” explains the 1996 Report of the No-Fault Insurance Committee of the Law Society of B.C. But “no-fault” itself is a generic term that encompasses many different types of no-fault schemes. And in Canada, no two provinces have the same plan. In a pure no-fault scheme, there’s no right to sue at all. Every person hurt in a traffic accident is compensated according to a schedule of benefits, regardless of who is to blame. Québec is a good example. Saskatchewan’s plan is a type of pure no-fault, but is less generous than Québec’s — unlike Québec, Saskatchewan offers no compensation for pain and suffering. Threshold no-fault schemes provide basic compensation to all accident victims, but allow seriously injured victims who meet a defined threshold to sue. That can be a “monetary threshold,” defined by the costs of the injury (e.g., the amount of the medical expenses), or a “verbal threshold,” defined by the seriousness of the injury (e.g, permanent serious physical disability). Ontario has a verbal threshold scheme. Claimants can sue for pain and suffering if they suffer a “permanent serious” disfigurement and/or impairment of important physical, mental or psychological function. Newfoundland is also considering a similar verbal threshold scheme. Then there are hybrid no- faults, where the basic scheme is tort-based, but mandatory insurance provides some basic no-fault benefits. Alberta and B.C. are examples.

Posted in Automobile | Leave a comment

Car insurance: price isn’t everything

Posted on January 1, 2002 by Other News Sources

January 1/2002

Attention News/Business Editors:

HALIFAX, Sept. 10 /CNW/ – The insurance industry, in response to an announcement from the Consumers’ Association of Canada on auto insurance rates in Canada, is cautioning consumers to compare the benefits paid out in claims with the premiums collected. Insurers maintain that auto insurance throughout Atlantic Canada delivers more to consumers with claims payouts that far exceed the levels seen in any province with government-run auto insurance. “I can tell you that this study is as flawed as the last one they did here in Nova Scotia,” says Don Forgeron, Vice President, Atlantic, Insurance Bureau of Canada. “We already have all the numbers on insurance and the average premiums in each of the four Atlantic provinces is lower than the B.C. average of $1,019. When you consider that even the lowest average insurance claim payout in this region far exceeds the average claim paid by the government-run insurer in B.C., consumers here are getting a much better deal” adds Forgeron. “If government-run auto insurance was really such a bargain, shouldn’t it be substantially cheaper for consumers in those provinces, given that claims are quite a bit less than what the private industry pays here?” asks Forgeron. IBC cautions that in general any cross-country comparison must take into account the benefit levels and other factors, such as access to the courts, all of which influence the bottom line premium. “Without looking at the claims paid, you’re really talking apples and orangutans,” says Forgeron. IBC’s figures on auto insurance premiums and claims are based on an analysis of every auto insurance policy in Atlantic Canada. IBC questions the limited data on which the CAC bases its study. “Maybe the Consumers’ Association can explain why they are advocating a government system that costs more than what we have here yet delivers only a fraction of the product for consumers?” adds Forgeron. Insurance Bureau of Canada is the national trade association of the private property and casualty insurance industry. It represents more than 90% of the non-government home, car and business insurance in Canada.

– 30-

For further information: John Karapita – (416) 362-2031 ext. 4351

 

Posted in Automobile | Leave a comment