Insurers seek green light to charge drivers hefty rate hike
Consultant says premiums could come down with or without injury cap
Last Updated: Tuesday, June 17, 2008 | 8:03 PM ET
CBC News
Alberta's insurance companies want to hike drivers' premiums by 37 per cent, citing uncertainty in the industry because of a court ruling earlier this year.
The Alberta Auto Insurance Rate Board began two days of hearings in Calgary Tuesday into how much drivers should be paying in the wake of the February ruling that struck down a government-imposed limit on minor injury claims.
The companies argue that the decision has hurt their bottom line, because the $4,000 cap on whiplash and other soft-tissue injuries had saved them millions of dollars and also sharply cut premiums for drivers.
'I don't think soft-tissue injuries brought this industry to its knees, and that's been the proof in the past, so we have to watch very skeptically what they say about the future.'— Jim Wachowich, Consumers' Association of Canada
Associate Chief Justice Neil Wittman of the Court of Queen's Bench ruled the payout cap was unconstitutional because it discriminates against specific victims of vehicle accidents. The case is now slated for Appeal Court in September.
"It is a very uncertain time, and hopefully this is understood by the rate board and others that it's pretty tough to predict it when we have such uncertainty," said Jim Rivait of the Insurance Bureau of Canada.
"The minor injury regulation that was struck down by Justice Wittman was basically solely responsible for the savings that people have seen over the last 3.5 years and you take that away, I mean, there's a significant upward pressure on rates and that's what we'll see."
The industry is requesting an increase of 37 per cent on compulsory insurance, based on the limit not being reinstated. That would amount to an additional $225 for the average driver.
But the board heard a different outlook Tuesday from Oliver Wyman, a management consulting firm. Ted Zubulake said the trend of decreasing bodily-injury-claim costs continues, so he believes premiums could come down, with or without the cap.
"I'm estimating that if the cap remains in place, costs could come down 13.2 per cent and, if the cap is repealed, costs could come down about 3.2 per cent, but again, this is preliminary," he told CBC News.
Consumer group skeptical of industry argument
The Consumers' Association of Canada said it has heard the industry plead poverty before — only to see companies post record profits at the end of the year.
"I don't think soft-tissue injuries brought this industry to its knees, and that's been the proof in the past, so we have to watch very skeptically what they say about the future," said association spokesman Jim Wachowich.
He said he hopes the rate board will keep the interests of consumers in mind during the hearings, even though most of the talking is being done by either insurance companies or lawyers.
Alfred Savage, chair of the automobile insurance board, admitted the body has a tough job ahead.
"It's going to be a very difficult decision and it's probably going to be a very controversial decision, no matter how we deal with it," he said.
The board must make a decision by Aug. 1, and any changes must be implemented by early November.
