Preliminary report on Choice System of automobile insurance

Government Services and Lands Minister Walter Noel advises officials in his department are continuing their review of Choice Automobile Insurance Systems in other parts of Canada and the United States.

Minister Noel said: "We are investigating all options for controlling the rising cost of automobile insurance. The cost of liability insurance has risen dramatically because of increased claim costs. Compensation for minor pain and suffering claims appears to be a significant cause of increasing costs. Many policy holders would like an option to purchase restricted coverage for pain and suffering if premiums would be significantly lower."

Pennsylvania appears to have the most successful Choice System. Automobile insurance in that state was in a crisis in the late 1980s with rapidly increasing costs resulting largely from increased pain and suffering claims. It implemented a Choice System in 1990, giving drivers a choice between unrestricted coverage for pain and suffering, or coverage restricted to compensation for injuries of a serious nature, enabling premium reductions for third party liability of about 40 per cent.

When the system was introduced, about 75 per cent of drivers chose full coverage for pain and suffering. Currently about 55 per cent of drivers choose full coverage, 45 per cent restricted.

The minister said: "Since the Choice System was implemented in Pennsylvania, automobile insurance has stabilized. The system seems to be widely accepted by consumers, insurance agents and lawyers. It is estimated that consumers have saved between $1 billion and $2 billion since implementation.

"The main advantage of a Choice System is that it allows consumers to choose the coverage and price range they want for pain and suffering compensation, just as they do for other options and deductibles. Many consumers want to have the option to pay a lower premium for automobile insurance, and not claim for pain and suffering unless the injury is permanent and serious. Their priority is to receive compensation for medical bills, lost income and vehicle repairs.

"We are continuing to analyse the options to determine what might be feasible and desirable for our province."

Media contact: Rick Callahan, Director of Communications, (709) 729-4860.

2002 12 05                                         3:50 p.m.