Alberta committee to review auto insurance, with eye to balancing costs and coverage

The Alberta government has launched a review of auto insurance in the province, saying it wants to ensure the industry can remain viable and that drivers can get affordable coverage.

Albertans pay some of the highest rates in Canada but have trouble getting critical protection, such as coverage for comprehensive or collision, Finance Minister Travis Toews said Wednesday.

But a five-per-cent annual cap on rate increases, introduced by the former NDP government and since abandoned by the United Conservative Party, is not coming back, he said.

"The rate cap simply put a Band-Aid on a wound that was festering," Toews said at the legislature Wednesday. "In the intermediate and long term it was no solution, and even in the short term it made a bad situation worse."

Auto insurance rates in Alberta have been rising sharply over the last five years. The trend prompted the NDP government to cap overall rate increases at five per cent annually for each insurer, starting in 2017.

The UCP government did not renew the cap in August, and some drivers have since reported getting notices of steep increases of 12 per cent or more.

Insurers have said that under the cap they were losing money in Alberta, given more payouts for car theft, injury claims, repairs and catastrophes such as the 2016 Fort McMurray wildfire.

Toews said the cap forced insurers to seek savings at the expense of drivers by, in some cases, refusing to offer critical protections.

In other cases, some clients were still hit with steep increases as long as the overall hike by the insurer to all Alberta clients remained at five per cent.

"Under the cap, we had insurers getting squeezed ... so Albertans were finding themselves with fewer and fewer insurance options," said Toews.

"We ultimately need to deal with the challenges that are leading to increased premiums ... and present a reformed insurance system in this province that can serve Albertans well."

A three-member committee has been asked to find solutions that work for all parties within the existing privately delivered system, Toews said.

In an interview with CBC News, Premier Jason Kenney said the government will use the "next six months to address out-of-control increases on personal injury awards." Those payouts contribute to driving up costs, which are then paid by customers through their premiums, he said. 

Asked about a cap, Kenney said former premier Ralph Klein put one in place in 2004.

"We're going to look at how to have a more effective control," Kenney said. "Something like a no-fault insurance system, which maintains a reasonable control on the awards."

In 2004, the Klein government put a $4,000 cap on soft-tissue injuries. In the four years that followed, auto insurance premiums dropped by about 18 per cent.

Back then, Alberta's auto insurance system was the envy of all the systems in Canada, said Celyeste Power, western vice-president of the Insurance Bureau of Canada.

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Court challenges in 2012 and 2015 found some "vulnerabilities" in the definition of minor injury, she said.

"What we've seen from that is a huge increase in legal representation and lawsuits around that to kind of push things outside of the cap," Power said. "Fifty-three per cent of the costs that have increased over the past five years have been associated with that."

As a result, there are injuries considered minor in other jurisdictions that are not in Alberta. A common example of that is TMJ (temporomandibular joint) disorders, which affect the jaw muscle, she said.

'We need to get this system fixed'

While fixing the definition of minor injury is important, Power said, there also needs to be adequate care in place to treat people who are injured in automobile collisions.

"Even if the minor injury cap is meant to capture more of these injuries, if it is a serious injury ... if you have chronic pain for six months plus, and that's considered serious, then of course you would be able to get the care and support you need," Power said.

Clarifying the definition would likely offer stability to premium rates, she said. 

"We need to get this system fixed for the three million drivers who count on it," Power said. Drivers are "sick of increases in their auto insurance" and want more control over what they're paying for and what they're buying.

The committee will consult with consumers, industry stakeholders, medical experts and the legal profession.

The committee includes chair Chris Daniel, who is in his second term as the consumer representative on the Automobile Insurance Rate Board; Shelley Miller, a lawyer with expertise in auto insurance reform; and Dr. Larry Ohlhauser, who has served as medical adviser to the superintendent of insurance for the past 12 years.

The committee will report back to government in the spring 2020 legislative session.

NDP's Service Alberta critic weighs in

Jon Carson, the NDP's Service Alberta critic, wants to see what comes of the panel but said he is worried that Albertans will continue to pay more for auto insurance in the meantime.

"The fact is, we're already several months past when this government said they were going to take action, and nothing has been done up to this point," Carson said.

"So, we're very concerned that now we have to wait several more months before any decision comes forward, whether it's actually protecting Albertans in their pocketbooks or not."

Carson said he disagreed with the finance minister's assessment that the five-per-cent rate increase cap introduced by the previous NDP government "made a bad situation worse."

"What we would have liked to see is that cap to stay in place, and then we can move forward with this committee discussion," Carson said. "But to preemptively get rid of that cap and then say we're going to come up with a solution. They've made a committee now to cover up the fact that they are the ones who've affected consumers so negatively at this point."

With files from Canadian Press