No accountability in no-fault auto insurance

Bad drivers walk while companies profit, Keith Mclaughlin writes.

COVID-19 has devastated many industries, but auto insurance companies are set to make a fortune. The pandemic has significantly reduced driving across the board. Fewer folks on the roads mean fewer insurance claims. This will save auto insurance companies hundreds of millions in the short term. Over the long-term, auto insurers have plans to save even more cash by dramatically overhauling Alberta’s insurance system.

The past 12 months have seen auto insurance rates spike across Alberta, putting further strain on family budgets. Price shocks like these and the resulting consumer backlash are problems for any government. That’s why Alberta’s ruling UCP struck another expert panel to recommend solutions.

One idea the government is considering — pushed hard by the insurance industry — is a “no-fault” auto insurance system.

No-fault insurance means that if you’re hurt or your vehicle is damaged in an accident, your own insurance company will pay for your losses, no matter who caused the accident. The other person’s losses will be covered by their insurance company. On the surface that seems OK. But who really benefits? The answer is insurance companies and bad drivers.

The most irresponsible aspect of no-fault insurance is the lack of accountability for bad drivers. If no one is “at-fault,” no one gets penalized for their actions. If you’re hurt in an accident that you didn’t cause, it doesn’t matter. You get scars. The other guy? He gets a walk. This is offensive to most Albertans who value personal responsibility and accountability. Instead of keeping the bar high, no-fault keeps the stakes low.

Experience in the U.S. and other provinces has shown that no-fault doesn’t reduce premiums; it leads to higher costs, fewer protections for consumers and no accountability for bad drivers or insurance companies. That’s no solution, that’s an even bigger problem.

A no-fault system removes your right to challenge an insurance company’s decisions in court. You won’t have the right to sue for damages related to the accident — whether it’s lost income or a debilitating injury. Instead, there is a “benefits schedule,” a chart that assigns a dollar amount to an injury. The private insurers decide what your injury is worth. They don’t have to listen to you, your doctor or the courts.

As for lost income, consider this. Currently, courts look at your personal situation to determine your losses. If you are a new university graduate or tradesperson just starting your career or a star junior hockey player with little current earnings but a strong likelihood of a lucrative career ahead of you, that is taken into account. In a no-fault system, it isn’t. If you were making little or nothing at the time of the accident, a no-fault system pretends you were going to be living a poverty-line existence the rest of your life, and compensates you on that basis.

All of this saves insurance companies a lot of money. These companies, by the way, have remained highly profitable the past year while their payouts to Albertans for things like theft, collision and injury claims have all declined since 2016.

Leaving that important detail aside, can we expect the windfall of a no-fault auto insurance system to cascade down to consumers through reduced premiums?

Don’t count on it.

No-fault insurance is common with government-run insurance programs like those in B.C. and Saskatchewan. In these systems, no-fault insurance can lead to lower premiums for a little while. But in private insurance markets, savings are taken as new profit for insurers. It’s no coincidence that Ontario drivers with private no-fault insurance also pay the highest premiums in Canada.

Albertans need affordable insurance, accountability for drivers and insurance companies, and consumer protections to ensure the system is fair. No-fault is none of that. Let’s hope the UCP stays true to Alberta’s roots and stands up for consumers, accountability and personal responsibility.

Keith Mclaughlin is a Calgary-based consultant and communications co-ordinator for Fair Alberta Injury Regulations. FAIR is a coalition of concerned consumers, medical professionals, injured Albertans and members of the legal community who are committed to protecting the rights of individuals who have been injured in motor vehicle accidents.