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More changes to accident benefits to reduce recovery to car accident victims

The Liberal government has released the budget for the 2015-16 fiscal year indicating the following changes relevant to the auto insurance industry:

– Combining attendant care benefits into the medical rehabilitation benefit category while increasing this category from $50,000 to $65,000 (currently attendant care is separate category at $36,000);

– Combining attendant care into the $1,000,000 catastrophic medical and rehabilitation benefit category (currently people with catastrophic injuries have $1,000,000 in attendant care benefits and $1,000,000 in medical and rehabilitation benefits);

– Reducing the standard duration for medical and rehabilitation benefits from 10 years to 5 years;

– Eliminating the 6 month period for non-earner benefits while putting a cap on their duration to a maximum of 2 years from the accident;

– Changing the catastrophic benefit definition to be “consistent with more up-to-date medical information and knowledge” ;

– Requiring goods and services not listed in the Statutory Accident Benefits Schedule to be “essential” and agreed on by the insurer;

– Increasing the deductibles on court awards for general damages for pain and suffering (currently $30,000 for awards under $100,000);

– The tort deductible to be taken into account when determining a party’s entitlement to costs in an action for damages from bodily injury or death (currently a party’s entitlement to costs is calculated on the gross amount).

Less than 5 years ago, the Ontario government made significant reductions to accident benefits including reducing med-rehab benefits from $100,000 to $50,000 and attendant care benefits from $72,000 to $36,000. In addition, the Ontario government also reduced mandatory income replacement coverage (from 80% of net income to 70% of gross income) and introduced the minor injury guideline which imposes a $3,500 cap for injuries that fall under this guideline.

Despite these reductions, according to a study commissioned by the Ontario Trial Lawyers Association (OTLA), Ontarians likely have overpaid auto insurance by about $3.1 billion between 2001 and 2013. The study found premiums have been too high, and consumers in Ontario have been paying too much for auto insurance. They also reported that insurers made on average 12% return on equity in 2014 alone. The most recent changes are made under the guise of reducing premiums and reflecting inflation. However, there does not appear to have been much discussion about insurer profits or premium reductions prior to the government’s decision to reduce even further standard benefit coverage. With respect to inflation, it should be noted that Income Replacement Benefits have not changed from the amount of $400 per week in 25 years. What is clear is that the recent changes will undoubtedly have a further negative impact on the seriously injured accident victims.

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