Changes to Newfoundland and Labrador’s Auto Insurance System

Though drivers in Newfoundland and Labrador have seen a reduction in their auto insurance premiums since 2004, problems continue to exist in the province’s auto insurance system that allow large pain and suffering awards for relatively minor injuries. If the experience in other provinces is any guide, additional reforms will be necessary to maintain stability in insurance rates.

Controlling costs

The insurance market across Canada is very healthy, allowing insurers to reduce premiums. The introduction in 2004 of a $2,500 deductible on pain and suffering awards for minor injuries did not effectively reduce the cost of court awards, and will not provide the long-term cost control that has been seen in the other Atlantic Provinces with a $2,500 cap, instead of just a deductible.

Cap vs. Deductible

A cap on pain and suffering awards for minor injuries, like those introduced in New Brunswick, Nova Scotia and Prince Edward Island, prevents the large court awards that have become all-too-common for relatively minor injuries. The cap does not reduce the amount of money available for medical care or to replace lost income, and it does not apply to people who suffer more serious, permanent injuries.

The deductible introduced in Newfoundland and Labrador, on the other hand, is not an effective way to control the cost of court awards in the auto insurance system. Essentially, the deductible reduces every pain and suffering award for a minor injury by $2,500. Though this might control costs in the short term, at least in theory, in practice plaintiffs have simply increased their claims by $2500. In terms of long-term cost control, this means that the deductible is ineffective.

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