Changes to Prince Edward Island’s Car Insurance System

Between 2001 and 2003, the auto insurance market in Prince Edward Island suffered from many of the same problems experienced in other provinces. These included rapidly escalating claims costs that led to increased premiums and problems for some people in getting the car insurance they needed at an affordable price.

In April 2004, the government introduced reforms that addressed one of the primary factors driving up costs – larger and larger court awards for relatively minor injuries. By putting a limit (referred to as a “cap”) of $2,500 on pain and suffering awards the government was able to control premiums without reducing the amount of money available for medical care or to replace lost income.

Where do the savings come from?

Before the cap, people who had suffered only a minor sprain or strain in a car collision could have been awarded large sums of money, above and beyond their actual economic losses. While the courts were understandably sympathetic to these victims, the value attached to pain and suffering, which is impossible to calculate, seemed to be ever increasing. This led to higher auto insurance premiums for everyone.

In introducing the cap, the government recognized that all Islanders could get premium relief without losing any of the benefits that are so essential following an injury.

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