Bill 53, which was adopted on December 4, 2003, entails a freeze in automobile insurance premiums from October 30, 2003 until September 2005.

A second phase of the reform was recently announced commanding premium reductions to automobile policyholders as of October 1, 2004.

Highlights of the reform

FIRST PHASE

Freeze order: 2003-2004

• Effective October 30, 2003, all premiums charged by insurance companies remain at the same level unless there is a change in coverage which warrants an increase such as:
  • Replacing a vehicle
  • Adding a driver
  • Having an at-fault accident or convictions during the past year

• The freeze applies to mandatory and optional coverage as well as all classes of vehicles.

SECOND PHASE: 2004-2005

Drivers will benefit from a reduction in their premium. The reduction concerns solely the mandatory coverage (i.e. third party liability and accident benefits) of drivers of private passenger vehicles and is calculated for the remainder of their policy, from October 1, 2004 to the expiration of the policy. Refund process must be completed on January 31, 2005 for drivers who are automatically eligible.

Premiums

• A new rate grid has been put in place to set premiums. It takes into account the driver’s driving record. For each year of safe driving, the driver will obtain discounts. Otherwise surcharges will apply leading to premium increases. The government has set up entry level premiums.

• Most drivers will enjoy at least a 5% reduction on their mandatory coverage premium.
  
  Examples:
  • A driver with a clean record (no at-fault accidents) whose current premium for mandatory coverage is lower than the grid rate, will benefit from a 5% reduction.
    
  • If the premium is higher than the grid rate, the driver will be entitled to a reduction of over 5%.

• Inexperienced good drivers will be entitled to premium reductions. Based on a grid rate set by the government, their premium on third party liability and accident benefits coverage will be capped.

• Rates for occasional drivers with less than eight (8) years of experience will be capped at 25% of the grid rate they would pay if they were the primary driver. There will be no charge for occasional driver with eight (8) or more years of experience.

Other changes

The new system is designed to get collision victims back to health and to ensure a fair compensation to them.

• Medical and rehabilitation benefits have been increased from $10,000 to $50,000.

• Minor injuries (sprains, strains and minor whiplash, etc.) have been redefined and related pain and suffering award are now capped at $4,000. Nevertheless, this does not prevent someone from going to court if they dispute the seriousness of their injury.

• A new process will allow injured victims of minor injuries to get fast and right treatment. The reform has established a twelve-week period during which treatments are pre-authorized and payments have to be made directly to health providers. By doing so, the reform intends to make sure that patients regain their health and pursue their activities quickly; and to reduce their out-of-pocket expenses.

• The minimum coverage for third party liability remains at $200,000.

• A newly created Automobile Insurance Rate Board, with representatives from main groups (including consumers), will regulate rates for mandatory coverage, collision, and comprehensive coverage.

Please do not hesitate to contact a member of our client services team should you have any questions.