Will the February 1st SABS Changes Reduce Claims Costs?

On February 1st, three amendment to the SABS became effective. These changes were met with criticism by some stakeholders because the Ontario government chose not to consult on the amendments before introducing them.  The reaction of stakeholders was predictable with respect to these particular changes, which may have been a factor in moving ahead without consulting.  The other contributing factor is the government’s rate reduction strategy.  Following an initial round of rate filings, FSCO was able to only squeeze an average of about 5% rate reductions.  The next 10% are likely to be much more difficult to find.

The February 1st, SABS amendments are:

• those seeking an exemption from the $3,500 minor injury cap based on a pre-existing condition must provide medical documentation that precedes the accident;
• those providing attendant care services can only be paid up to any income loss incurred; and
• the section 35 election can only be used once by a claimant.

These amendments are part of a strategy to tighten up the system so that perhaps some savings trickle down and contribute to the promised 15% rate reduction.

Will there be any savings and, if there are, will they be significant enough to have an impact?

In a previous post, I had noted that the minor injury cap appears to be holding.  Those claims attempting to escape the cap either have a psychological component or pre-existing condition.  In the absence of arbitration decisions regarding the scope of the minor injury definition, there is still cost uncertainty regarding the current product.  Because of the number minor injury claims, the cost impact of a decision regarding the definition could be significant one way or the other.  Therefore, this amendment could lead to insurers re-evaluating their claim costs over time and lower premiums.

The attendant care amendment may produce any real savings.  Let’s say a claimant is eligible to claim  a monthly attendant care benefit of $2,000.  A family member has quit their job to provide the care and has been submitting invoices totaling $2,000.  If that family member was only earning $250 per week at their job, that person would only be able to invoice up to $1,000 per month under the SABS amendment.  The family is still eligible for another $1,000 per month and will more than likely use it purchase care either from a company or another family member or friend.  I suspect this change will produce no savings.

As for the third amendment, I don’t have access to data that would indicate how many elections take place after an initial election is made.  Prior to 2010, there were claimants who would elect to receive the caregiver benefit and later elect to receive income replacement benefit or non-earner benefit when they no longer qualified as a caregiver.  However, since the caregiver benefit is now optional coverage except for those with catastrophic injuries, this scenario is likely quite rare.  The savings would have to be negligible.