Today's blog post expands on Mark McCourt's guest column published in yesterday's Calgary Herald.
Automobile insurance liability coverage is compulsory for vehicle owners, because the 10 - 20% of Alberta motorists with a tendency to drive carelessly typically lack financial capacity to personally compensate the innocent victims of their reckless driving for painful injuries and other losses suffered by those victims (mostly women and children) in car crashes. Because motorists are legally required to purchase liability insurance, the price of the product is regulated by government.
In Alberta, the Auto Insurance Rate Board regulates policy premium prices. A report recently released by the AIRB's actuary notes that in 2023, even though claims costs dropped yet again (by 2.65% last year), rates rose by 5.25%, despite a largely fictional "rate freeze" implemented in January of last year by now-departed Finance Minister Travis Toews. The actuarial report pegs the average annual basic auto insurance premium at $1079, under $90 per month. This is up only $388 from the $691 average annual cost of basic coverage in Alberta in 2002, over two decades ago -- an increase substantially below the general inflation rate. These numbers certainly put the lie to the myth that there is an "affordability crisis" in Alberta auto insurance. As expert economist Dr. Jack Mintz has pointed out, this alleged affordability crisis is far more political than factual, and the UCP government would do well to quash any misguided musings by its injudicious insurance policy bureaucrats to engage in radical, unconservative, politically suicidal marketplace meddling such as replacing auto accident tort law (the system in place in half of the provinces in Canada) with a leftist no-fault scheme. The actuarial report also found that auto insurance industry profits (including investment income) skyrocketed in 2023 as compared to the industry's 2022 profit margins. Accordingly, despite calls by insurance lobbyists for "urgent" government intervention to protect insurers from their obligation to fairly compensate injured Albertans, and notwithstanding the underwhelming news that a trio of tiny insurers representing a whopping 1% market share have announced they're spitting the bit, evidently auto insurance industry bottom lines in the province are pleasingly plump as is.
In stark contrast to a handful of imprudent TBF bureaucrats (maybe the odd one with delusional dreams of becoming CEO of an Insurance Corporation of Alberta in a Nenshi government), severely normal Albertans believe in rights and responsibilities. We know that innocent victims of negligent drivers deserve the right to full and fair compensation from at-fault motorists' insurers for pain and suffering, income loss, medical expenses and other damages. We further support the reality that drivers with poor records on the road have a responsibility to pay significantly higher premiums than the 80 - 90% of Alberta policyholders with good driving records. The socialist concept of no-fault auto insurance (the system in place in Manitoba, Saskatchewan and BC), which rewards reckless drivers with lower premiums and higher benefits at the expense of good drivers and innocent injured victims, is staggeringly unpopular (even the insurance lobby opposes the idea) and frankly unAlbertan. Let's be clear: in order to deliver lower premiums, no-fault jurisdictions slash compensation for innocent victims and marginally increase compensation for at-fault motorists. Rates for good drivers uptick a smidge, but rates for bad ones plummet, so that the overall average premium price drops, albeit only temporarily until the spike in road carnage that tragically and inevitably follows a switch to no-fault sends rates rising again (which perhaps is OK with beancounter bureaucrats apparently unconcerned with "acceptable collateral damage"). You get what you pay for: in Alberta, the average claim payout is north of $12,000. In the three no-fault Western Canadian provinces, the average claim payout is less than $6,000, spread out between innocent victims and careless drivers regardless of fault. And of course, apart from offering chump change benefits, the other way that BC, Saskatchewan and Manitoba deliver lower auto insurance rates is that those provinces have eliminated profit (ie., profit-driven private insurance companies) from the equation, and subsidize premium prices with taxpayer dollars. Implementing no-fault auto insurance in Alberta would be a very bad idea, with very predictable consequences.
With the foregoing as a basis, what is the roadmap to a "WIN-WIN-WIN" on this file for insurers, Albertans and our UCP government? Undoubtedly, the first step is for Danielle Smith's duly elected MLAs to take the wheel, slam on the brakes, make a sharp U-turn and head for the off ramp before unelected, unaccountable, blatantly biased bureaucrats with inexcusable tunnel visions of a socialist no-fault regime drive UCP caucus off a cliff. Some fresh, common sense conservative thinking on this issue is in order to arrive at ideas that would enjoy broad consensus support amongst accident victims, insurance policyholders, the legal profession and the insurance industry. For example, allowing more flexibility in the purchase of optional collision coverage (the cost of which has increased at a far higher percentage rate over the past two decades than has the cost of mandatory basic coverage) is one option. With the steep hike in the cost of vehicles and vehicle repairs, providing consumers with the option of purchasing repair coverage using less expensive, after-market replacement parts is worth carefully considering after further consultation with stakeholders including auto insurers and autobody shops.
Numerous other common sense solutions to put more money back in the hands of policyholders are outlined in Mark McCourt's blog posts in January and February of this year, as well as in his blog post published last month. Potential action items for the UCP government to consider include: modifying the Grid framework so as to stop making good drivers oversubsidize the rates of bad ones, repealing the patently asinine Direct Compensation Property Damage scheme (as per a resolution passed by party members at last year's UCP AGM), ordering insurers to rebate good drivers premiums paid in 2023 in excess of the AIRB's target benchmarks, scrapping the insurance premium tax as Dr. Mintz has been urging for over two decades, reducing compulsory Section B benefits and allowing insurers to sell optional excess Section B benefits, waiving Schedule C costs on claims settled at the adjuster level, eliminating prejudgment interest on general damages, enacting an automatic 25% contributory negligence reduction for failure to wear a seatbelt, incentivizing through reduced premiums the use of winter tires, increasing penalties for traffic violations and for uninsured driving, implementing an insurance validation program, codifying a discount rate for future damage calculations to eliminate the need for costly expert economist reports, reversing the most recent increase to the health care recovery levy, slashing bloated insurance broker commissions by a third, de-indexing the minor injury cap and reducing the amount of the cap by 17.5% to $5000, and requiring those who wish to receive capped compensation for injuries captured by the Minor Injury Regulation (which comprises 80% of claims) to purchase that coverage from their own auto insurers (thus relieving negligent drivers' insurers of that particular compensatory responsibility). Adopting even a fraction of these suggestions would bring the average Albertan's auto insurance premiums more in line with the policy prices of the substandard, socialist-style no-fault public auto insurance products offered in the other three Western Canadian provinces, while still delivering to consumers superior bang for the buck with competitive private insurers in an auto accident tort law system that remains a key component of the Alberta Advantage.
About the author: Recognized as one of Canada's Top Lawyers, Mark McCourt was called to the Alberta Bar in August 1991 and founded McCourt Law Offices in August 1995. McCourt was selected to the 2023 Top 50 Lawyers in Canada list by the Canadian Lawyer Society.