NDP cap a ‘crisis’ for auto insurers

The insurance industry says some Albertans could end up without car insurance and some companies may pull out of the province because of the NDP government’s cap on premium increases.

But the province says it’s working to protect consumers while also ensuring a healthy insurance industry.

Last December, Finance Minister Joe Ceci issued an order limiting cumulative auto rate hikes to five per cent, citing concerns over the effect of hefty rate increases on Albertans, with the policy set to be in place until the end of November.

But both the Insurance Bureau of Canada and the Insurance Brokers Association of Alberta says the policy is causing a “crisis” in the auto insurance market in the province.

George Hodgson, chief executive of the brokers association, said the government has essentially frozen premiums even as the cost of claims — both for bodily injury and damage to vehicles — have been increasing substantially.

In an interview this week, Hodgson said insurance companies are taking a loss on auto claims, leading some to cancel contracts with brokers, while others are contemplating leaving the Alberta market entirely.

“They don’t want to lose any more money,” he said.

“This is an untenable situation.” Under provincial law, insurers are required to provide auto insurance to paying customers.

But Lance Miller, CEO of online brokerage firm Surex Direct, said insurance companies are “filtering ” clients by only selling liability insurance and refusing to provide non-mandatory collision and compensation insurance to certain customers.

He noted that many banks require collision insurance as a condition of loans.

As well, some insurers are refusing to provide payment plans.

Drivers who have had two or more collisions in the past six years, or multiple hail claims, or customers who have ever let their insurance lapse are among those running into problems, he said.

“We have a whole block of Albertans that aren’t able to get insurance,” said Miller.

Ceci was not made available for an interview.

But the minister’s press secretary, Mike Brown, said there has been no increase in complaints from consumers unable to access insurance.

AFFORDABILITY

The government wants to ensure that auto insurance remains affordable to Albertans as it undertakes a review of claim costs in the province, which will be completed next year, he said.

Brown noted the NDP government also recently introduced a cap limiting claim payments for minor injuries, providing cost relief for the insurance industry.

“If we do make any changes to the auto insurance framework, it will be evidence-based and in the best interests of Albertans,” he said.

“Of course, you want to balance affordable, fair insurance while making sure you have a viable insurance industry.”

But Celyeste Power, the Insurance Bureau of Canada’s acting vice-president for Western Canada, said the minor injury cap, while welcome, doesn’t offset “spiralling ” claim costs.

She said companies are already paying out between $1.01 and $1.29 on auto claims in Alberta for every dollar brought in from premiums.

Power said the cap on premium increases appears to be politically motivated and the industry is concerned it will be extended past next spring ’s provincial election in order to avoid significant rate hikes in the run-up to the vote.

“If that happens, the industry could be losing between $300 million and $600 million next year,” she said.

The insurance brokers association has launched a letter-writing campaign to MLAs to ask the province to change its policy to raise the cap from five per cent to 10 per cent, with an eye to an eventual return to “actuarially supported premiums.”