Concern among Canadian consumers about skyrocketing insurance rates is so strong that even Alberta, famed for its distaste of regulation, is moving to tighten controls on auto insurance.
The province said yesterday that it will roll back soaring premiums for new, younger drivers, and perhaps limit payouts for whiplash and other soft-tissue injuries.
"We know that we have to do something because it is an issue not only in Alberta but nationally," Premier Ralph Klein said.
Ontario, Nova Scotia and New Brunswick have all proposed major changes in recent weeks to their largely private insurance systems to cope with steep increases in rates. In Alberta, typical premiums jumped 59 per cent from February, 2002, to February, 2003, according to Statistics Canada.
Mr. Klein said he wants to ensure that good drivers do not pay for the sins of bad drivers, and that those who are seriously injured are fairly compensated, but added that there should be as little government intervention as possible in fashioning a new system.
The government caucus yesterday rejected a full-blown public system, but endorsed several steps proposed by MLA Rob Renner to regulate auto insurance in the province more tightly. Among them:
Establishment of an entry-level premium for new drivers, among those hit hardest by soaring insurance rates.
Emphasis on driving experience as the main criterion for establishing premiums, rather than demographic factors.
Increasing premiums for motorists with traffic violations and for those found at fault in accidents.
Examining ways to cut the payout costs for insurers, including the possibility of capping claims for comparatively minor soft-tissue injuries such as whiplash. Ontario, New Brunswick and Nova Scotia have all limited such claims to reduce costs to insurers and premiums to drivers.
Grouping lower-risk and higher-risk drivers together to decrease the average cost to insurers.
Alberta's proposed changes borrow several pages from the rule book of neighbouring Saskatchewan, including the fixed premium for new drivers and the expanded-risk categories for drivers. The latter policy means that as drivers gain experience, their premiums don't decline as quickly as under systems with more narrowly defined classifications.
Insurance expert Anne Kleffner said the new rules are a departure from Alberta's largely free-market approach to most issues. "It's an interesting issue when the government starts dictating insurance prices," she said, noting that insurers already must justify rate increases to the province.
The insurance industry is cautiously welcoming Alberta's proposed changes as a promising start, while warning that any new system must include limitations on payouts for soft-tissue injuries. Otherwise, they say, lower premiums could force the industry to stop insuring new drivers. "This would be a big problem," said Jim Rivait, a vice-president at the Insurance Bureau of Canada.
Mr. Rivait said he believes the changes to Alberta's insurance system will ultimately improve his industry's profitability. Right now, insurers pay $1.16 in claims for every dollar they receive in premiums. He said he believes that gap will soon be eliminated.
Many of the specifics of Alberta's new approach to auto insurance have yet to be ironed out.
Finance Minister Pat Nelson said much of the policy will be determined over the summer, in consultation with the industry, and that a final version will be ready in the fall.
Mr. Renner, the MLA whose cross-country study of insurance systems provided the basis for the proposed changes, said the government will definitely be limiting the amounts that insurers pay out, even as it requires them to reduce some premiums. "There's two sides to the equation, and we'll be dealing with both sides."