June 19, 2003
Alberta should emulate B.C. on insurance
By LICIA CORBELLA -- Calgary Sun
http://www.canoe.ca/Columnists/corbella.html

There comes a time when you have to call a bluff. That's what the Alberta government should make clear it's prepared to do with the insurance companies that have been whining about their tough times of late, resulting in unfairly high hikes in automobile insurance costs.

The private insurance industry across the country has been raising insurance rates to make up for losses it incurred during the stock market slump.

Some say we should be grateful that insurers have been subsidizing our auto insurance rates by investing wisely on Wall Street. Okay, thank you insurance companies.

But before we all get too grateful, let's look at what the industry is asking of governments and consumers as a result of the bear market following Sept. First, here in Alberta, the industry wants the province to put an end to our "tort" system of insurance -- wherein the victim of, say, a drunk driver can sue that driver and get compensated for their injury. Sounds reasonable to me. Insurance companies, however, much prefer the unfair "no-fault" system, where the drunk who maimed you gets the same compensation from the accident he caused as you do.

Tell me you like that and I'll tell you to look in the mirror to see someone who likes the look of injustice and unfairness.

That, however, is exactly what the New Brunswick government vowed to do earlier this week, much to the delight of the Insurance Bureau of Canada, which sent out a gleeful press release at the news, that, starting July 1, pain and suffering awards for most personal injuries would be capped at $2,500.

So, if said drunk rear ends your vehicle in New Brunswick and leaves you dealing with the pain of that for a year or two, you get a maximum of $2,500 and so does he.

What's annoying about all of this, however, is that we need not look very far to find a place where auto insurance rates are substantially lower than in most parts of the country, but where injury victims still have the right to sue for their injuries. That place is B.C., which, admittedly has had a rash of horrendous governments but nonetheless did something right when it created the Insurance Corporation of British Columbia (ICBC).

Last year, ICBC raised auto insurance rates by about 7%, whereas the rates in Alberta jumped by 57%, according to Statistics Canada. The insurance industry, however, claims Stats Canada is wrong and that Alberta's premiums only went up by 15.4%. For argument's sake, let's assume the industry is right and Stats Can is wrong, that's still double B.C's rate increase.

In B.C., the typical monthly automobile insurance premium as of February 2003 is $141. In Alberta, it's $211. Some may argue that's not a lot but ICBC isn't seeking to take away a victim's right to sue, and pays out about 20% more per "tort" case than Alberta victims receive, and was still able to turn a profit of $45 million last year to boot.

So how bad are things for the private insurers? During this last quarter, the private insurance industry made $1.1 billion. Sounds like a lot but, as Jim Rivait, a vice-president with the Insurance Bureau of Canada points out, most of that's spread out over 220 companies and isn't exactly a whopping return on investment, never mind risk. Fair enough.

Mark McCourt, a personal injury lawyer in Edmonton, says he received some internal insurance documents -- designed for the eyes of a CEO only -- that show the insurance companies are doing very well indeed.

"According to these internal 'deep throat' documents," says McCourt, "claims costs per insured vehicle in Alberta increased less than 2.8% last year. By way of comparison, Stats Canada reports that the rate of inflation in Alberta last year was 8.3% and auto insurance premiums in Alberta increased by 57%."

What does this all mean? The Alberta government needs to decide which of its principles is more important -- the idea that individuals are responsible for their actions and therefore someone is at "fault" in most accidents; or that it will never involve itself in the business of being in business.

The province needs to make it clear to the industry that it is prepared to go the B.C route. After all, if things are so rotten in the auto insurance industry, why are insurance companies lobbying the B.C. government as we speak to take over from ICBC? It's time to call the industry's bluff. Watch them fold.