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 to ensure that the industry can remain viable and that drivers can get affordable coverage.

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

Auto insurance rates had been capped at five per cent for the last couple of years, but the government did not renew that cap in August and some drivers have since reported getting notices of steep rate hikes in the new year.

Insurers have said that under the cap they were losing money in Alberta, given a rise in payouts due to issues such as car theft, injury claims, and high repair costs linked to more expensive technology in vehicles.

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

Finance Minister Travis Toews, at the podium, accompanied by members of the review panel. From left, Shelley Miller, Dr. Larry Ohlhauser and Chris Daniel. (David Bajer/CBC)

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.” These pay-outs contribute to driving up costs, which are then paid by customers through their premiums. 

When asked about a cap, Kenney said former premier Ralph Klein did it in 2004. “We’re going to look at how to have a more effective control. Something like a no-fault insurance system which maintains a reasonable control on the awards,” Kenney said.

In 2004, the Klein government put a $4,000 cap on soft-tissue injury. 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.

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 being considered minor 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 added. 

“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 Albertans, consumers, industry stakeholders, medical services 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.

With files from Canadian Press

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