No-Fault Insurance in Alberta?

Commentary, Economy, Frank Atkins

In these times when everyone’s attention seems to be riveted on COVID-19, it is important to remember that there are still bad policy ideas that have some chance of becoming legislation in the not too distant future. 

The Alberta government recently convened an expert panel to examine what is widely being called Alberta’s car insurance problem. As is usually the case in these types of matters, the problem seems to be largely defined by either the government or some lobby group or some combination of both. In this case it appears that 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’s Finance Minister has recently said that he is hearing from insurance companies who say they’re 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 Alberta government is yielding to the intense lobbying of insurance companies. The scary proposition here 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 common law tort system under which claimants can sue for full and fair compensation for pain and suffering and economic losses; 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 is, why would the Alberta government consider moving toward a no-fault system? The Premier 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 the Alberta Premier recently endorsed the Erin O’Toole campaign, for the Conservative Party of Canada leadership, 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, Alberta’s Premier is abandoning his conservative principles in response to lobbying pressure from insurance companies.

In addition to the above, as Albertans, we 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. However, the Alberta economy currently already has very high unemployment. In addition, the unemployment that is being created by the COVID-19 response and the lowering of world oil prices is exacerbating the existing problem. We do not need the additional unemployment implied by moving to a full no-fault system.  

 

Frank Atkins is a Senior Fellow at the Frontier Centre for Public Policy and a former University of Calgary economist.