Auto insurance injury cap may jump to $7,500

The New Brunswick government is recommending the cap on damages for minor personal injuries sustained in automobile accidents be increased to $7,500, up from $2,500.

It is also proposing a new, more narrow definition for such injuries in its response to the Auto Insurance Working Group, released Thursday by Justice Minister Marie-Claude Blais.

That way, more people could sue for bigger, uncapped amounts.

The provincial government's proposed cap of $7,500 on pain and suffering awards due to minor personal injuries exceeds the working group's suggested cap and would match the current limit in Nova Scotia, Blais said in a statement.

She is also recommending the cap on damages be indexed to inflation.

"There are ways we can move forward in this province, continuing to have very low insurance premiums," said Blais.

Insurance rates won't increase

The provincial government report says changing the definition of minor injury could lead to a 13 per cent increase in premiums if the cap remains at $2,500.

Raising the cap to $7,500 would result in even more payouts and 28 per cent increase in bodily injury premiums.

Still, the government doesn't believe insurance premiums will rise, based on the experience in Nova Scotia when caps increased there, said Blais.

"A lot of companies came forward and said, 'Well, it will have a consequence(s) on premium,' well it didn't, it didn't to this day."

'Actuaries have told us that any increase in the required average premium…could be absorbed by insurers.'  —Justice Minister Marie-Claude Blais

More generous rules on payouts won't necessarily lead companies to charge more, said Bill Adams, vice-president Atlantic for the Insurance Bureau of Canada.

"Just because there may be additional claim costs, that's not necessarily going to be transferred to increased premiums," he said.

But it's still too early to rely on the Nova Scotia example, said Adams. Although the number of claims hasn't increased, the amount paid out, has. So it will be two to three years before the insurance bureau decides if auto premiums will be increased, he said.

The government report also said rates won't increase because insurance companies are charging the average customer $92 a year more than they need to.

"Actuaries have told us that any increase in the required average premium with the proposed definition, together with an increase in the cap amount, could be absorbed by insurers, resulting in no increase in the average premiums," said Blais.

Adams declined to comment on that part of the report.

The Liberals dropped insurance rates by an average of 13.5 per cent in 2006-07.

The current cap of $2,500 was put in place in 2003, when insurance rates had skyrocketed and the industry was blaming personal injury payouts.

In November, the working group had recommended boosting the cap on damages for minor injuries to between $4,000 and $6,000.

New definition

The working group also recommended changing the definition of minor injury, which was described as "too vague, and too complex" and confusing.

But the department feels the working group's proposed definition also raises questions of ambiguity and is restrictive, said Blais.

Instead, the provincial government has come up with its own proposed definition.

"The new definition would mean that fewer New Brunswickers would be limited by the cap," said Blais, estimating the number of claimants subject to the cap under the current definition would drop to 71 per cent from 81 per cent.

Under the proposed definition, minor personal injury means any of the following injuries that do not result in serious impairment or in permanent serious disfigurement:

• contusion
• abrasion
• laceration
• sprain
• strain
• subluxation
• whiplash associated disorder
• a fracture of a bone that is not weight-bearing

The working group was appointed in January 2011 to review the existing cap and how injuries are defined.

The provincial government will seek public input before making a final decision, Blais said.

That might not happen before 2013.