2020 Vision: We Can See Clearly Now that Insurance Lobbyists are Reaching into their Old Bag of Tricks
A number of posts on our firm’s law blog last year informed readers of the auto insurance lobby’s unrelenting efforts to persuade our UCP government to 1) lift the lid on the rates auto insurance companies can charge policyholders and 2) gut the compensatory benefits for pain and suffering available to innocent Albertans wrongfully injured by careless drivers. Step one in the very well-connected, well-financed insurance lobby’s scheme was accomplished last year, just before the Labour Day long weekend. Step two will be the auto insurance lobby’s sales pitch to the auto insurance “reform” advisory panel, named by Alberta Finance Minister Travis Toews just before Christmas. Here is an excerpt from McCourt Law Offices’ submission to this panel:
"Why would you want to penalize accident victims who have already been hurt? There is no reason to do that, except the myth that they have been taking advantage of the system, which I don't think has been demonstrated." -- Tort law expert Lewis Klar (a former AIRB member as well as Dean of the University of Alberta’s Faculty of Law).
“Why should we, because of concern about the mounting cost of automobile insurance premiums, accept a solution that restricts the rights of innocent third parties to be compensated for the pain and suffering they experienced because of the fault or carelessness of a motorist? Surely, we, as a feeling and informed and thinking society can do better than that!” — The Honourable Dr. John C. Crosbie Q.C., the former Justice Minister of Canada, who passed away last month.
The Minor Injury Regulation (MIR) was enacted in 2004 after the auto insurance industry rate-shocked policyholders, allegedly in response to “an insurance industry in crisis” caused by “skyrocketing bodily injury claims”. Actually, bodily injury claims costs per insured vehicle had been in sharp decline from 1999-2004 and insurers were posting all-time record high profits, but the then-Finance Minister was not going to let those facts get in the way of granting insurers a rights for rates swap, restricting the full compensation rights of certain Albertans injured by negligent motorists in exchange for reduced auto insurance rates, particularly for high-risk young male drivers such as her son.
Fast forward to 2020, and what’s old is new again: with the Kenney government having removed the Notley administration’s artificial rate cap, some insurers have returned to their old playbook, rate-shocking consumers again while blaming “skyrocketing injury claims costs” for the steep hike in premiums. In fact, bodily injury claims frequency has been trending downward for years, injury claims costs per insured vehicle evidently dropped sharply from 2018 to 2019 according to the latest available statistics, and frankly any insurance lobby allegations to the contrary quite clearly are, to borrow a phrase from philosopher Harry Frankfurt, “not germane to the enterprise of describing reality.” With the benefit of 2020 hindsight, it is plain to see that certain players in Alberta’s automobile insurance industry once again are trying to create the appearance of a continuing crisis conducive to lobbying government for unjust, unnecessary marketplace meddling to slash chronic pain and suffering compensation or implement a “no-fault” regime (which robs from innocent victims to enrich guilty tortfeasors).
Under Alberta’s tort law system (save for minor whiplash, sprains and strains capped under the MIR), innocent injured Albertans victimized by negligent motorists are entitled to 100% full and fair compensation for their pain and suffering, income loss, out-of-pocket expenses and lost homemaking capacity. When a provincial government (typically a socialist one) switches from tort law to a no-fault scheme, legal rights of innocent victims (mostly women and children) injured by reckless drivers are confiscated and then redistributed to guilty wrongdoers in the form of “enhanced” benefits and/or to insurance corporations in the form of padded profit margins. These “enhanced” benefits tend to be illusory: for example, in a report prepared for the PC government in early 2004 outlining draft diagnostic and treatment protocols, Dr. Larry Ohlhauser anticipated that implementation of the proposed protocols would actually reduce medical expense claims costs for the insurance industry, notwithstanding a planned increase (on paper) of Section B medical expense benefits from $10,000 to $50,000. Consistent with Dr. Ohlhauser's prediction, actuaries for Alberta’s Auto Insurance Rate Board in 2006 found that Section B medical expense benefits costs had dropped by about 10% post-reform. So much for any suggestion that part of the purpose of the MIR was to finance additional insurer costs associated with enhanced “no-fault” medical expense benefits. The fact of the matter is that there is zero reason Alberta auto insurers raking in over $5 billion in premiums annually (plus further revenues earned investing those premiums and accumulated capital) cannot offer consumers healthy tort rights and the option of purchasing at an affordably low and competitive price generous excess no-fault medical and income replacement benefits over and above the mandatory minimum. Alleging that it must be an “either or” scenario is nonsense.
Contrary to insurance lobby propaganda dutifully parroted by some UCP politicians, the Alberta auto insurance industry sky is not falling. What’s actually now falling, according to the data recently revealed by the Automobile Insurance Rate Board’s chief actuary, are bodily injury frequency, severity, and claims costs per insured vehicle. Further, the expiry of the socialist rate cap last year has allowed pricing corrections as needed, restoring a competitive free enterprise marketplace where consumers exercising due diligence by shopping around are rewarded and well-managed auto insurance corporations will prosper in 2020. Other minor adjustments, such as bringing pre-judgment interest on non-pecuniary damages in line with PJI on pecuniary damages, updating Schedule C costs (which haven’t been increased to account for inflation in over 20 years) to discourage needlessly protracted litigation, and perhaps rounding down (and de-indexing) the quantum of the cap on minor sprains and strains to $5,000, would be relatively uncontroversial. Also, allowing insurers to offer policyholders optional increased Section B coverage (just like optional increased Section A coverage under the current system) would be good for consumers and auto insurers. But intrusive intervention to address this contrived crisis by way of slashing or outright eliminating chronic pain compensation for innocent injured Albertans is ill-advised, unnecessary and unfair.