Why I Told Alberta’s Auto Insurance Regulator to Freeze Premiums Next Year
posted in: Personal Injury
Each year, the Alberta Insurance Rate Board (AIRB) meets to examine insurance company submissions on why Albertans’ premiums should either increase, remain the same, or be decreased. Like most years, several insurance companies are asking for increases to consumers’ premiums.
I recently presented before the AIRB on behalf of the Alberta Civil Trial Lawyers Association to advocate that the AIRB should freeze any further premium rate increases for Alberta consumers on private passenger automobile insurance. This is why I told the rate board that premiums should be frozen next year.
The Alberta Civil Trial Lawyers Association retained Craig Allen, an actuarial consultant, to review the data presented by the insurance industry and analyze Alberta automobile insurance company profits. Based on Allen’s analysis, we presented information to show that private passenger automobile claims costs when adjusted for inflation have remained stable since 2016 and that insurance company profits have increased dramatically.
In our review, it became apparent that the insurance industry position that claims costs have been “skyrocketing” is simply not true when one looks at the data since 2016. However, the insurance industry has pushed this narrative to advocate for significantly increased premiums, especially over the last two years.
Our presentation before the rate board focused on the evidence of stabilized claims costs and also the significant reduction in claims associated with the COVID-19 pandemic.
The evidence clearly showed that the significantly reduced volume of traffic on Alberta roads resulted in exactly what we expected would happen: Claims cost per vehicle dropped significantly. And yet, at the same time Albertans premiums rose at near record levels.
Our analysis showed that as a result of increased premiums and the reduction in claims cost due to COVID-19 that Alberta automobile insurers reaped windfall profits of almost $1 billion in 2020.
We also presented data that suggests continued significant profits for the auto insurance industry are expected in Alberta into 2021 and beyond, due to the continued effects of COVID-19 and also legislative changes that have been implemented by the UCP government.
In November 2020, the UCP passed Bill 41, a law which introduced several technical adjustments to things like interest on injury claims, the types of injuries subject to a “cap” on financial compensation, and limits on the number of expert witness reports in personal injury cases, all with the intended effect of improving the financial position of auto insurers. Even the Insurance Bureau of Canada (IBC) agrees that the expected effects of Bill 41 should result in hundreds of millions of dollars in new annual savings for the insurance industry.
These savings, I hope, will eventually lead to decreased premiums for Alberta drivers.
When you have Albertans across-the-board paying substantially higher premiums for automobile insurance, while at the same time claims costs have stabilized and in fact decreased significantly in 2020 due to COVID, the result can only lead to one of two outcomes: decreased premiums or significantly increased profits for Alberta auto insurance companies. Unfortunately, while insurance companies have experienced near record profits, Alberta drivers have not yet seen substantial broad-based relief in their premiums.
While the Alberta government’s intent in passing Bill 41 was to stabilize or decrease auto insurance premiums, it remains to be seen if this will actually occur, or if the insurance industry will simply continue to reap the expanded profits from these recent legislative changes and the impacts of COVID 19.
I contend that in light of stabilized claims costs, the effects of COVID-19 and the significant savings to the insurance industry associated with Bill 41, that the rates for private passenger automobile insurance premiums absolutely should not increase.
It is expected that the AIRB will release its decision this month.
The presentations made by ACTLA and other interested parties to the AIRB can be found on the AIRB website.
Owen Lewis is the managing partner of KMSC Law LLP and is based in Grande Prairie. If you have any questions about Bill 41 and how it will effect your insurance premiums, you can contact our Injury Law Team.
This Op-Ed was also recently published in the Calgary Herald. If you’d like to include this article in your publication, please reach out to Owen at [email protected].