The report recommends removing the car insurance premium cap

New report on auto insurance in Alberta recommends the province remove the cap on auto insurance rates, lower the insurance tax rate and introduce limited no-fault coverage.

This report, written by economist and public policy expert Jack Mintz on behalf of the Insurance Bureau of Canada (IBC), also advises the provincial government not to implement a public and provincial auto insurance system, as is the case in British Columbia, Saskatchewan, Manitoba and Quebec.

The release of Jack Mintz’s report is part of a provincial reflection as the government plans to reform the auto insurance system so it costs less for motorists.

Shortly after the election last year, the Alberta government committed to making changes to lower auto insurance premiums.

According to his mandate letter, which dates from July 2023, the Minister for Affordability and Public Services, Nathan Neudorfwas to make short- and long-term recommendations in this direction to Premier Danielle Smith.

Four months later, Danielle Smith unveiled elements of a short-term plan at a press conference, limiting the increase in insurance premiums to 3.7%. good drivers. She also promised a long-term reform for 2024.

Last spring, the province released two studies looking at different car insurance models and asked Albertans to voice their opinions in an online survey.

The insurance companies are leaving the province

According to Jack Mintz, a cap on insurance premiums will lead to higher prices in the long term, especially because insurance companies will find it difficult to generate the profits that allow them to maintain their capital investment, which will lead to instability in this sector.

The economist estimates in his report that Alberta must avoid capping premiums and controlling prices, as this creates a lot of confusion in the industry.

This is probably the most important of my recommendationshe said.

The Vice-President of the Insurance Bureau of Canada, Aaron Sutherlandis also of this opinion. Jack Mintz, like other experts before him, maintains that price caps and price controls do not work.

The only way to improve affordability is to act on the factors that lead to upward pressure on prices, he said in an interview with CBC.

He explains that the premiums increase when the damages increase. However, access costs have increased by 19% over the past two years and replacement costs have increased by 27%. Vehicle replacement and theft are also on the rise.

The result of the premium cap, he says, is that car insurance costs drivers less than it costs the insurance company to provide the product.

Insurance companies are losing money and pulling out of the Alberta market. Between 2013 and 2022, ten insurers have exited the Alberta auto insurance market. Three others have indicated that they intend to do the same this year, according to Aaron Sutherland.

Protection of the ability to sue

The limited form of no-fault coverage proposed by Jack Mintz would apply to accidents that cause minor injuries because litigation in these cases can result in costs that eat up a significant portion of payouts to injured parties.

According to him, people involved in more serious accidents must continue to be able to initiate proceedings regarding the civil liability of offenders.

Spokesman for FAIR Albert, Jackie Halpern says this view provides a balanced solution for Albertans to continue to pursue legal action, ensuring drivers remain accountable for their actions.

In his report, Jack Mintz opposes the establishment of a public, non-profit car insurance system. Instead, he points to the model in the Atlantic provinces, where flawless systems have led to the lowest premiums in the country, he says.

He also recommends that the province reduce the tax on insurance premiums, which is currently 4%, to 3%, or otherwise that it simply abolish it.

A model proposed at the end of December

Jack Mintz is also surprised that car insurance costs are such a big deal to the government when they generally account for 2% of an Albertan’s spending.

Taxes are much more important, as are food and housing, when you think about household expenses, he says, but car insurance is mandatory, and maybe that’s why people linger there so much.

Jack Mintz specifies that his report has been sent to the provincial government and hopes that it will be taken into account in the reform of car insurance.

A spokesman for the Minister of Finance Nate Horner indicated in an email that other studies commissioned by the province have reached conclusions similar to those of Mr. Mintz.

The province, he writes, will say more before the end of the year.

With information from Karina Zapata