On November 20th, the Ontario legislature passed a bill aimed at lowering the interest rate insurance companies have to pay on your pain and suffering.
See Bill: http://www.ontla.on.ca/web/bills/bills_detail.do?locale=en&Intranet=&BillID=3007
Prior to the passing of this Bill, interest rates encouraged insurers to settle cases in a timely manner. Now, there is no need for insurers to move quickly, and so begins the process of dragging everything out. This allows for insurers to bank the money and profit from it, while accident victims wait longer for their compensation.
The prejudgment interest rate has historically provided incentive to settle cases in a timely manner. With the interest rate for pain and suffering damages in MVAs reduced from 5% to 1.3%, there will obviously be little incentive for insurers to deal expeditiously with claims for pain and suffering.
Instead, insurers will keep their money in the bank for as long as possible, make additional income from their investments, and starve out innocent plaintiffs.
Currently, insurance companies make 3% on their investments, and therefore they can expect to earn at least 1.7% profit holding on to an innocent victim’s compensation for damages for every year that they put off settlement. It’s really just simple math.
A second aspect of this Bill removes the accident victim’s right to sue relating to accident benefits. This loss will lead to duplicated effort and unnecessary costs. People who are injured in auto accidents may be forced to participate in two similar adjudicative processes – one at the Licence Appeals Tribunal for accident benefits disputes, and then a trial involving a Tort claim where the same issues may be litigated a second time, using the same medical experts!
*The potential waste with this change is huge.
Have a question about an accident you were in? Order one of our free accident guides or call for a free consultation at 1-888-574-4529 to book a consultation within 24-48 hours.