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  • Mark McCourt - Founder of McCourt Law Offices

Submission to AIRB 2023 Annual Review

Each year, Alberta's Automobile Insurance Rate Board (AIRB) reviews submissions from its own actuary, from the board's Consumer Representative, and from interested stakeholders -- mostly insurance companies and lobby groups such as the Insurance Bureau of Canada (IBC) -- at an annual meeting with a view to determining benchmarks that will guide the AIRB when it considers auto insurer rate approval applications filed in Q4 of the current year and into the first three months (or the first three quarters, if for some reason a semi-annual review isn't held) of the following year. This year's meeting (via Zoom call, thus reducing the risk of auto accidents amongst participants) is set for August 17, 2023.

Notwithstanding that by the IBC's own admission, a 0% underwriting profit (where premiums in equal claims costs and expenses out, leaving massive investment income earned on cash flow and accumulated capital as pure, sweet profit) would be "A Perfect World", the AIRB has established (at policyholders' expense) 7% of the premium as a target pre-tax auto insurer profit provision. When the industry's administrative expense ratio of 27% (bloated by factors including preposterous C-suite salaries, extravagant broker fees, and the government's ill-advised 4% premium tax) is taken into account, this means insurers need to keep the auto claims ratio at a microscopic 66% to score a 7% underwriting profit. It's therefore, all the more astonishing that Alberta's auto insurance industry has exceeded that unnecessarily generous target profit provision by a wide margin, reaping massive pre-tax profits of about three billion dollars over the past three years (2020-2022), thanks in no small part to a Kenney administration that prioritized insurer profits over the people of Alberta. While auto insurance premiums currently are relatively stable (partly due to the government freezing rates at all-time highs), it is time for the AIRB to take action to reduce rates for the 90% of Alberta motorists (the good drivers) who, because of the flawed Grid framework, are over-subsidizing the premiums of the 10% (the bad drivers) in our province. McCourt Law Offices has represented the interests of innocent Albertans injured by reckless drivers since 1995. This is the firm's first submission to the AIRB in a dozen years, having previously presented written submissions at five consecutive AIRB annual industry-wide adjustment meetings between 2007-2011. Our 2023 submission may be summed up by quoting the last paragraph of an Edmonton Journal op-ed penned a month ago by firm founder and principal counsel Mark McCourt: "Auto insurance premiums in our province are overinflated due to outrageous insurance industry profits, which have been rising as sharply as bodily injury claims costs have been falling. The obvious, ethical and fair Alberta way to reduce auto insurance rates for good drivers is to trim windfall insurer profit margins, not to rob regular Albertans of our civil legal rights — full stop." Of course, trimming what the AIRB recognized in its Annual Review Report last year as "unprecedented profit levels" is not what the IBC has in mind; the insurance lobby favours a scheme formerly dubbed Driving Change and now euphemistically named Enhancing Care & Expanding Choice, in which our provincial government would misappropriate legal freedoms from ordinary Albertans and hand the confiscated rights to auto insurance companies so that insurers could turn around and sell those stolen freedoms back to any Albertan willing and able to pay a steep premium surcharge (estimated at an extra $200/yr for starters) to restore a degraded version of those common law rights. It's hard to imagine that noted freedom fighter Danielle Smith, who led her political party to an Alberta general election victory in May, is amenable to the insurance lobby's "modest proposal" (which frankly would be a better fit were the government to combine IBC's foolish idea with an action plan to boot all private auto insurers out of the province and replace the lot of them with one monolithic public auto insurance corporation). It's also doubtful that Premier Smith's new Finance Minister Nate Horner supports this proposed "rights for rates swap" where Albertans would basically give up their ability to sue in return for marginally cheaper insurance premiums. Not all of the insurance industry's ideas are odious, but its proposed reverse Robin Hood scam (reminiscent of this video) certainly is, and should be resoundingly rejected with all due respect. In conclusion, while bodily injury claims costs per insured vehicle were stable from 2016 - 2020 before plummeting after the government amended the MIR and passed Bill 41, the average Albertan's vehicle insurance premium has jumped 33% (from about $1200/yr to about $1600/yr) during that span. As evidenced by this preeminent treatise, powerful auto insurance lobbyists have had their way in Alberta for far too long. Enough is enough: it's time for the AIRB to stand up for three million Alberta motorists rather than for a few dozen avaricious auto insurance corporations by a) reducing rates for good drivers by replacing the 7% profit provision target with a 75% auto claims ratio target and b) recommending that auto insurers turn their attention toward reducing excessive operating expenses and away from lobbying efforts aimed at further reducing legal entitlement to pain and suffering compensation for innocent victims of negligent drivers. Thanks very much for taking the time to read this submission, including of course the informative links. Enjoy the rest of the summer!

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