EDMONTON—As the Alberta government holds public consultations about the future of car insurance, it’s been sitting on a report that calls for people to lose their right to sue for pain and suffering, potentially resulting in higher premiums than currently exist.

The wide-ranging study, provided internally to Alberta’s treasury board and finance department, and obtained by the Star, has been in the hands of the provincial government since November.

Critics, including personal injury lawyers, are taking issue with the report’s findings. The recommendations mirror some aspects of what’s been established in Ontario as well — a provincial system widely considered to be in need of reform.

Since the end of 2019, the United Conservatives have been seeking feedback from people in the province for a new “sustainable” system, which will “reduce costs for consumers,” according to the Alberta government’s website. This came after the government ended an annual five per cent cap on insurance premiums put in place by the previous NDP government in 2017, ushering in premium hikes throughout 2019.

The report was compiled by Ontario actuary firm J.S. Cheng & Partners Inc., insurance consulting firm Cameron & Associates Insurance Consultants Ltd., and in consultation with representatives from the Alberta treasury board and finance department. The document was put together as part of a claims and costs study requested in 2018 under the former NDP government.

It recommends what’s called a “no-fault” system and removing the right to sue over pain and suffering from the auto-insurance system, replacing it with a benefits schedule for injuries from a car accident — like a chart that puts a dollar amount to an injury.

The crux of the problem in Alberta, according to the study, is that people with several different injuries are seeking legal representation more often and that bodily injury claims are going up.

It found that people with what it calls “top four” injuries are “more likely to be represented by a lawyer” and that the percentage of claims from people with one or more of the injuries “has steadily increased from 16 per cent in 2010 to 30 per cent in 2016.”

Furthermore, the study says that in 2017, pain and suffering took up 57 per cent of money that goes toward bodily injuries that make up claims costs.

“The main cost driver within bodily injury claims is pain and suffering,” the study says.

The “top four” injury claims are psychological injuries, such as Post Traumatic Stress Disorder; concussions; injuries to the joint that connects the jaw to the skull (the temporomandibular joint, or TMJ); and whiplash-associated disorder with chronic pain lasting longer than six months.

“Albertans are increasingly retaining legal representation to negotiate their compensation following a motor vehicle accident,” reads the study.

“Our recommendation is that the system can be modified to make it easier for a claimant to make a claim without the time consuming and costly legal process.”

This is what makes it a “no-fault” system, similar to what’s in place in Quebec and Ontario, which caught Wilfrid Laurier University professor Mary Kelly’s attention. There are several different “no-fault” systems in North America, but essentially, it means that each insurer covers their own customer instead of a system where the at-fault driver gets sued by someone who isn’t at fault in an accident.

“It doesn’t work in Ontario,” said Kelly, an insurance expert. “I think that’s a fair statement, which is why I’m rather puzzled that it is being considered in Alberta.”

An independent 2017 report reviewing the Ontario system, requested by the provincial government and compiled by David Marshall, called it “one of the least effective insurance systems in Canada” and said that claims costs have “consistently gone up.”

“(The system) is filled with disputes and inefficiencies, and a very high percentage of premiums are being used to pay experts and lawyers and not going directly to injured persons,” the Ontario report says.

Ontario has a partial no-fault system where benefits are given to people by insurance companies regardless of fault, but where “if the accident is severe enough … not at-fault individuals have the right to sue the at-fault individuals,” Kelly says.

“I have a hard time thinking how that’s going to work in Alberta,” Kelly said.

The study recommends a benefits schedule. Picture a document that says, if you break your leg, you get X amount of dollars, says Kelly. Ontario runs into problems when, for example, a person with only one leg breaks their leg in a car accident, she says, and the payout for breaking a leg on pain and suffering grounds isn’t going to be adequate for someone with one leg as opposed to someone with two.

Complaints are sometimes lodged against insurance companies in this situation because people feel they aren’t getting enough, Kelly explained. The schedule of benefits would likely be put together after widespread consultation with stakeholders in the province, she said.

Another concern is that if there is a list of benefits for people, it could result in a “gaming mentality” where those who are injured could try to show that they’re more disabled than they actually are after an accident. Kelly says this is what happens in Ontario.

You would have pain and suffering compensation coupled with physical injuries on this “meat chart” — this is what Kelly calls it, since it puts dollar amounts on various bodily injuries — and “If I can show I’m just a little bit worse off, I get that next level of funding.”

In Ontario, “it’s completely bogus,” said Kelly, pointing to the Marshall report as proof.

Ontario’s insurance coverage is delivered by private companies, just like in Alberta. In British Columbia and Saskatchewan, insurance is delivered by public bodies — Saskatchewan Government Insurance and the Insurance Corporation of British Columbia.

The study says that if the recommendations within it are adopted for Alberta, there’s an “expected” scenario: Insurance premiums will most likely go up by three to four per cent every year, while claims costs go down for insurance companies at the same rate. In the longer term, says the study, premiums will increase at “a more moderate rate.”

However, the other “optimistic” scenario outlined in the report says that claims costs could decline from the 2019 or 2018 levels and premiums “go sideways or slightly higher (though below the Consumer Price Index).” This is the most likely outcome if all of its recommendations are adopted, particularly striking legal recourse for pain and suffering, the study says.

The study uses data points up to 2016 and 2017 to show bodily injury claims costs have been skyrocketing in recent years, making the insurance system in Alberta unsustainable. But not all experts agree that’s currently the case.

Craig Allen, an actuary working with the legal community in Alberta and who has run his own numbers, disputes the study.

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“The cost of bodily injury claims per vehicle stopped increasing about three years ago, the middle of 2016,” he said. “They had been increasing for about five years before that between 2011 and 2016.”

Celyeste Power, Western vice-president for the Insurance Bureau of Canada (IBC), an industry organization that represents Canada’s private home, car and business insurers, says the study “confirmed, along with the other activities that we’ve seen, that bodily injury claims are the largest contributor to the increases that we’ve seen over the past few years.”

Power said the IBC is interested in finding “balance” in the system where claims costs are managed along with premium.

It’s unclear if recommendations within the report would achieve that, though.

The notion that such a system is on the horizon, not run by a public body, has Alberta personal injury lawyers and doctors alarmed. Some contend the insurance companies have been lobbying the provincial government for this kind of change because it means more profits for them. Power said they’re “absolutely passionate” about changing the system since the consumer “is not happy” with prices.

“When our consumers aren’t happy, we’re not happy,” she said.

Ward Hanson, a personal injury lawyer with Assiff Law in Edmonton, said he thinks of lawyers as advocates for people who may need to sue for damages and “the prospect of future costs.”

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“In the ideal world, there’s a component of their settlement that takes into account the return for treatment ten years down the road,” he said.

A concern Hanson hears often from people is that post-concussion syndrome could affect their ability to work many years after an accident. With a schedule of benefits in place, a person could lose their ability to challenge in court and receive pain and suffering compensation should they be unable to work years later.

“These people are concerned about their livelihood,” said Hanson.

The study also recommends an independent assessor be responsible for figuring out the severity of an injury after an automobile accident. The assessor would be independent from lawyers and insurers and they wouldn’t be allowed to refer clients to the assessor.

Dr. Salim Esmail, an orthopedic surgeon based in Edmonton, says the system where an independent assessor is in place could be abused as well.

“What happens in the medical profession is, clients get referred to an agency where you think you’ll get the opinion that you want,” said Esmail. “What happens is that specialists who do a lot of work with the insurance companies tend to get more referrals from the insurance companies for that reason.”

In the 1990s, a system using independent assessors was proposed in Ontario as well, said Kelly, but it ultimately failed under the weight of tribunals and challenges to the findings.

“There are always problems in trying to quantify injuries that are hard to measure, like chronic pain, like psychological injury,” she said.

“The problem when you create a model with a threshold, a model that is fundamentally set up so that if you can show that you’re just a little bit more injured, you get access to a much richer benefit plan — some people have the incentive to try and reach that next level.”

The Star submitted a list of questions about the study to the finance ministry, but spokesperson Jerrica Goodwin said, “It’s premature to discuss many of the points you raise,” noting the government had appointed a panel to review Alberta’s current system.

“No decisions have been made. We have appointed the committee to review the system and are committed to an automobile insurance system that is fair, affordable and accessible for Albertans,” she said.

Clarification – March 18, 2020: This article was edited from a previous version to better reflect professor Mary Kelly’s characterization of the leaked Alberta auto-insurance study.

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