Legal Matters with Chris Richard: Auto Insurance Coverage

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This transcript is from the VIP Late Lunch with Lee Sterry radio show on NewsTalk 610 CKTB.

Lee Sterry: This is the VIP late lunch, and we have a gentleman with us today that I’ve been looking forward to speaking with for quite some time. Chris Richard is his name.

Hi Chris. Chris is the managing partner of Lancaster Chown & Welch LLP, the largest personal injury law firm in Niagara. And the main topic we’re going to be on today is probably one that I’ve been trying to get to the bottom of for a while and we will and I don’t know if we have time to get to the bottom of it but at least we can get to the middle of it. And we are talking insurance, predominantly auto insurance. Lancaster Chown & Welch LLP represents individuals who are injured in accidents as well as people who are involved in disputes with their own insurance company. They have been doing it for 30 years now. Congratulations.

Chris Richard: Thank you, yeah, this is our 30th anniversary this year.

Lee Sterry: And where are you located?

Chris Richard: We serve clients all through Niagara, but our office is located at 55 King Street here in St. Catharines.

Lee Sterry: Well, congratulations on the milestone. And thanks for contributing to our tax space here in Niagara.

Chris Richard: Thank you.

Lee Sterry: Well, you know, 30 years in business.

Chris Richard: I try not to think about that part.

Lee Sterry: Alright, well we appreciate it anyway. So, let’s talk right off the bat about something that you and I have been discussing for awhile and just so that folks know we are not interviewing an insurance agent here, it might sound like it but we’re not. We are actually talking to a lawyer who represents people that as I said before have been injured in accidents or are in some sort of dispute and have confusion with their own insurer, etc. because things have changed considerably over the last little while.

Chris Richard: That’s right, as of June 1st the way we choose auto insurance in the province of Ontario has been dramatically changed. One of the interesting side-effects of that is that sometimes I feel like I’ve become an insurance salesman because I’m having conversations with people on almost a daily basis about these changes and talking about some of the new optional benefits that people need to consider. There just doesn’t seem to be a lot of knowledge out there about it so I’m glad that you have me on today so I can try to provide some information so people know how to make these choices.

Lee Sterry: And the reason that we are going to be discussing what use to be and what is a direct dividend and correct me if I’m wrong of the government pledge to have insurance fees reduced by 15% during the last election campaign, is that correct?

Chris Richard: That’s right. The government regularly has consultations with the insurance industry and the key focus of those discussions is rates and how to control rates of auto insurance. The solution that they’ve come up is that we can reduce rates if we reduce coverage. And we deal with that from time to time. Usually there’s a dramatic change every five years or so in Ontario, however this recent change is a dramatic departure from the prior model that we had.

Lee Sterry: OK, draw the difference for us, then to now, as far as that model is concerned.

Chris Richard: Sure. I have to back up a little bit and talk about kind of the development of insurance in the province of Ontario. The auto insurance product, I use that word specifically because auto insurance is a product that we’re purchasing, has three main aspects to it. The first is liability coverage, so that’s how much money is available in the event that we cause an accident to somebody else. So, if somebody says they have liability limit of a $1 million or $2 million, that’s the liability coverage, I’m not really talking about that today. The second part is property damage and that’s what everybody thinks about when they think of car insurance. If I’m in an accident and there’s damage done to my vehicle, someone has to pay to get it fixed -that’s property damage.

Lee Sterry: Yeah, those two things use to always be apart of our policy called PLPD back in the old days.

Chris Richard: That’s right, and again that’s not part of the major changes that the government has brought in. The changes involve a part that people think of even less – statutory accident benefits, which is money to pay for loss of income or medical care that someone needs following an accident in which they sustain injury. Auto insurance is interesting and a lot of people don’t know this but when it comes to accident benefits, everybody’s policy, the policy wording in the province of Ontario for all insurance companies, is identical. And the reason it’s identical is because the government creates the policy they than give that policy to private companies, private insurer–

Lee Sterry: And say “here are your guidelines.”

Chris Richard: That’s right, they are not allowed to change the wording, and they have to sell the product as the government gives it to them. They set their own pricing for that product, that’s why your broker will shop for different insurance companies to try and get your best rate, but the product is identical. And historically the government has created that product based on the need of the person injured in an accident. So, they look and say, “What’s the minimum level of benefits that we want to provide to the people of Ontario through their auto insurance?” It’s then priced based on that and, with a couple of very minor exceptions, most people in the province of Ontario have the exact same levels of coverage. That’s the model that’s changed in effect June 1.

Lee Sterry: Now, we’re going to get into the accident benefit cost and stuff after the break but that’s the model that we had?

Chris Richard: That’s right.

Lee Sterry: How has that significantly changed generally?

Chris Richard: What the government has done on the advice of the insurance companies is they’ve changed to a pick and choose model so this is sold as giving consumers more choice on their coverage for auto insurance, that’s how the government and the insurance industry–

Lee Sterry: That how they’re spinning it.

Chris Richard: But really, they’ve greatly reduced the basic benefits that are available, and I think they’re betting that most consumers will not choose to increase that coverage.

Lee Sterry: So, it’s almost like, it use to cost you 80 cents for a chocolate bar this big, now it’s going to cost you a buck and the chocolate bar is smaller.

Chris Richard: Although, maybe even a little different than that, if it use to cost you 80 cents for a big chocolate bar, they’re now saying, “Hey it’s going to cost you 75 cents for a chocolate bar that’s half the size.”

Lee Sterry: It seems like you’re saving the money the government said you were going to save but you’re not getting anywhere near the coverage that you had before.

Chris Richard: That’s exactly it.

Lee Sterry: OK, we are going to take a break and than we will be back to dig into that just a little bit deeper. We are with Chris Richard, of Lancaster Chown & Welch LLP, personal injury lawyers, the biggest firm in Niagara and we are talking about your auto insurance coverage. We’ll be right back…

Chris Richard from Lancaster Chown & Welch LLP, the largest personal injury law firm in Niagara celebrating 30 years of service to the Niagara region this year. We have been trying to clarify the difference between what was in the Ontario auto insurance world, to what is and I think we’ve pretty much done that. It may look like at renewal time your rates are going down, when in fact there have been changes to accident benefits that you are entitled to. Therein lies the rub – to top yourself back up, you’ve got to pay more, correct?

Chris Richard: That’s correct.

Lee Sterry: So, what are these actual changes to the medical benefits, attendant care benefits and accident benefits that we are talking about?

Chris Richard: There are a number and probably more frankly than we have time to deal with today. What I’m going to do is talk about the ones that I think are most important and the ones that we should all be concerned about as our policies all come up for renewal.

Prior to June 1 everybody in the province of Ontario for noncatastrophic injuries – serious but normal injuries from a car accident – had $50 000 available for medical care. Medical care can be medication costs, treatment costs, physiotherapy and chiropractor care. It can be nursing care, assistive devices if you needed some modifications made to your home, all types of things that can result from a car accident. Everybody in the province of Ontario had $50 000 available for that. It seems like a lot of money but it’s amazing how quickly that that can go. I had a client recently who sustained multiple fractures to her legs and she actually spent the $50 000 in about eight months, so it can go really quick with the cost of medial care. In addition to that, everybody in the province of Ontario had $36 000 to pay for what’s called attendant care, which means you have somebody help you do the things that you can’t do yourself. That’s $86 000 for the two, if we added them together. What the Government and insurance industry has done is they’ve now lumped those two things together so you have a combined total for both medical benefits and attendant care and they’ve reduced it to $65 000.

Lee Sterry: So, there’s $21 000 gone already?

Chris Richard: Gone. And unless you purchase optional benefits there’s often no way to get that care back. And I used the example of my client who ran through her medical benefits in about eight months and how long then? She’d probably run through it in about five or six months. And if there’s no other place to get that money and no place to pay it means most times unfortunately you just don’t get the care that you need.

Lee Sterry: Or you go severely into debt.

Chris Richard: So, that affects almost all of us, I mean a lot of people when they’re buying insurance they think they’re never going to be involved in a car accident–

Lee Sterry: But that’s why you have insurance in the first place.

Chris Richard: And the stats say otherwise. We know that in the province of Ontario, the latest stats I could find were about 2014, but there was just under 50 000 people injured in car accidents in the province of Ontario in 2014.

Lee Sterry: So, that was the noncatastrophic portion?

Chris Richard: That’s right.

Lee Sterry: OK, next.

Chris Richard: I think this is even harder to justify in terms of the changes. Catastrophic injuries are the most serious injuries that you can think of – life changing. So, somebody that is going to be in a wheelchair for the rest of their life, serious brain injuries, injuries involving significant periods of lost of consciousness, things like that. And these are the people that need the most care. And most of us in the industry, I think, are shocked by the changes that were done here. Prior to June 1 if you had one of these very serious injuries, you had $1 million available to you in medical and rehabilitations expenses, and another $1 million available to you for attendant care expenses. And, again, that seems like a lot but you can imagine, if somebody is quadriplegic for example, one of the worst degrees we can imagine, that person needs 24-hour care. Well who’s going to provide that care and what’s the cost associated with that? And you can go through $1 million dollars quite quickly.

Lee Sterry: Well, when you’re talking about for the rest of your life.

Chris Richard: Typically for somebody with that injury that $1 million lasts about seven years. So, what do you do about the rest of your life after? What the government did effective June 1 is they basically cut that in half. So now rather than having $2 million available combined for medical benefits and for care, you have $1 million now available to you. And realistically, how long does that last? If just the attendant care lasted about seven years previously, at this point in time we are talking a fraction of that. And honestly I’m not sure what happens after that. The level on benefits has come so bare for these most serious injuries that I fear we are going to have some people that just don’t have care available and the quality of their lives are much less.

Lee Sterry: This is the way that has been chosen to achieve that 10 to 15 percent reduction in fees, which is just smoke and mirrors. That’s my comment not yours but that’s just what it seems like to me.

Chris Richard: I have a hard time arguing against that. It seems to me that the bargain for reducing these rates is falling squarely on the shoulders of the people who are least able to manage it.

Lee Sterry: Those are the big changes that we’re talking about, and there are others that we could delve into but it would take us more time. And I repeat to the people who are listening here, we are not selling insurance here, anything but. This is why we have a personal injury lawyer here as opposed to an insurance company representative. So, what free advice do you give to people out there when renewing their policies?

Chris Richard: First off, what I’m afraid of is that a year from now I’m going to have people who’ve been involved in serious accidents come into my office and they’ll have chosen not to purchase optional benefits, that I’m going to talk about in a minute. And I’m going to have to look at them and say “I’m sorry but there just isn’t going to be enough money available here to take care of you.”

Lee Sterry: And have that come as a surprise to them.

Chris Richard: That’s right, so I’m here to try and avoid those conversations. What people can do is now purchase optional benefits. There are a couple of different products available. Like I said, I’m not selling insurance but these are things that I would recommend that any of my friends or family purchase just to ensure that they’re protected. You can increase the medical coverage by purchasing an optional benefit that takes it from $65 000 to $130 000. This is going to take us —

Lee Sterry: Take us above where we use to be.

Chris Richard: That’s right. Secondly, you can purchase a top-up to that, which would take the medical coverage and the attendant care coverage up to $1 million. And that’s the one that I think should be purchased because even our basic benefits before weren’t always adequate as I was talking about with some of the examples. The second thing you could do is purchase coverage to take the catastrophic amounts payable back up to what they were before June 1 so you have $2 million available. Those are two benefits that I recommend everybody should be asking their brokers about and getting pricing on and purchasing.

Lee Sterry: And the insurance companies are sending renewal notices that notify people that there are changes, but a lot of people might not be paying attention to what it’s saying.

Chris Richard: That’s right, you know every year when I get my renewal in from my own insurance company. There’s paper work that’s enclosed in the envelope and you know I’m in the industry and I don’t probably pay to much more attention to it than anybody else does. This year is different, that paper work that comes in that envelope can make a big difference in someone’s life. You know people are probably out there saying, “Yeah but how much is this going to cost?” If your policy renewed after June 1, so if it renewed June 30, you had to make these decisions quite quickly. Most people are probably already making them. However, if your policy doesn’t renew until next May than this isn’t going to come up for you until next May. A year from now we will have this fully implemented, but it’s just rolling out, so we don’t have the full rates available. It will depend on insurance companies but we’ve done an informal survey to see what insurance companies are charging for this. We expect this to evolve over time but the best information we currently have is that to increase the medical and rehabilitation benefits to a $130 000 a year, double the current rate, costs about $33 a year. To increase it to $1 million dollars, the next tier, would cost $65 a year.

Lee Sterry: In general.

Chris Richard: Yeah, absolutely. I don’t sell insurance so this is just a result of some informal surveys. And the last one, for the catastrophic injury benefits to increase that to the pre-June 1 levels, would cost about $38 a year.

Lee Sterry: You know, it’s not that big an investment for some better peace of mind at the end of the day.

Chris Richard: About $100 a year and you can maintain the current levels of coverage. And that $100 a year is what I expect the government to hold up a year from now to say, “See we reduced your rates by 10 or 15 percent,” but it’s really because you’re paying for less coverage.

Lee Sterry: Chris Richard, thank you, very informative. Lancaster Chown & Welch LLP personal injury lawyers, this is 610 CKTB, the VIP Late Lunch continues. Thanks again.