As I write this article in early March, the Kenney government has convened an expert panel to examine what is widely being called Alberta’s car insurance problem. As far as I can tell, the so-called problem is being defined by the insurance industry. For instance, Celyeste Power, who is the vice-president of the western region for the Insurance Bureau of Canada, was quoted in the Edmonton Journal as saying that injury lawsuits are the biggest factor driving up insurance costs. In addition, Alberta Finance Minister Travis Toews has recently said he is hearing from insurance companies that they are selling insurance at a loss. This is a rather odd statement as, if this is true, the question is why are they even selling insurance? What appears to be going on here is that the Kenney government is yielding to the intense lobbying of insurance companies. The scary proposition is that the insurance companies, in an attempt to reduce personal injury claims, are seeking to move Alberta toward a full no-fault system for car insurance.
In Alberta, we already have a form of no-fault insurance, coupled with the provision that individuals have the right to sue if they do not receive adequate compensation for their injuries. A full no-fault system would remove the right to sue. This would be extraordinarily unfair to individuals who have lost their livelihood due to negligence on the part of other drivers. In addition to this, in a full no-fault system, drivers have no incentive to correct bad habits, as insurance premiums would not be driven up by a bad driving record.
The important question: why would the Kenney government consider moving toward a no-fault system? Jason Kenney ran for the leadership of the UCP and conducted the recent election based on the underlying conservative principles that free markets and less government intervention will lead to an economy which will function more efficiently. A no-fault insurance system is exactly the opposite of these free market beliefs. Further, I cannot see how a no-fault system, such as those in Saskatchewan and British Columbia, could be implemented without the creation of a provincial insurance corporation. Imagine the bureaucratic inefficiencies that would arise with the creation of the Insurance Corporation of Alberta.
It is worth pointing out that Jason Kenney recently endorsed the federal Conservative leadership candidacy of Erin O’Toole by saying, “We need a leader who is competent and principled. A leader who won’t run away from conservative principles under pressure from the media or the left.” Apparently, in spite of the reasons for his support of Mr. O’Toole, Mr. Kenney is abandoning his conservative principles in response to lobbying pressure from insurance companies.
In addition to the above, Albertans need to give serious consideration to the unemployment consequences of moving to a no-fault system. As with any government policy, the implied reallocation of resources will put some people out of work. It is difficult to actually quantify how much unemployment may be created by this change. The Alberta economy already has high unemployment. A great deal of this unemployment is centred in the Calgary region, where troubles with the oil and gas sector continue. Given this, any increase in Calgary unemployment would make the current problem even worse.
Frank Atkins is a senior fellow at the Frontier Centre for Public Policy.