Auto insurance revamp blocked

A lberta's Automobile Insurance Rate Board is looking to revamp how drivers' premiums are calculated in the province, by moving away from an annual industry-wide rate adjustment, which could produce more options and potentially better rates for motorists.
But the proposal has been rejected by the Stelmach government, which maintains the current system is working well.
The province doesn't foresee major reforms and certainly won't make any changes pending an Alberta Court of Appeal ruling, expected shortly, that will determine whether a$4,000 cap on pay-outs for soft-tissue injuries is unconstitutional.
The rate board, which regulates the annual premium changes for basic automobile insurance in Alberta, wants to scrap the "one-size-fits-all" industry-wide adjustment and instead review companies on an individual basis to see whether their rate proposals are appropriate.
The new model would pro-vide more insurance options for drivers, reduce market uncertainty and lower rates over the long term, the board argues, while still allowing the AIRB to ensure companies don't apply exorbitant premium increases.
"You could shop some more so you might be able to find a better rate,"explains Merle Taylor, the rate board's consumer advocate. "I don't think it's in anyone's interest if the (annual rate caps) are the same across all companies."
In 2008, the board permitted companies to increase premiums for basic auto insurance by up to five per cent, effective last Nov. 1.
Axing the industry-wide cap could see insurance companies target their preferred niche markets of motorists -- either good drivers or high-risk ones--and potentially offer reduced premiums to their customers, Taylor believes.
The Stelmach government, however, has no plans to accommodate the rate board's proposal to reform insurance, arguing there's too much uncertainty in the system as all sides wait for the precedent-setting soft-tissue injury ruling from the Alberta Court of Appeal.
"The government is very satisfied with the current strategies,"said Finance Minister Iris Evans. "I don't see a reason for change."
Evans said it's critical that any reforms to automobile insurance must be transparent so the consumer can easily understand the system and know what options various companies are offering.
The industry argues that under an individual approval process (as proposed by the board), insurers wouldn't be subjected as much to the risk-sharing pool and could adjust their rates accordingly, both up and down depending on circumstances.
"Competition will be the greatest regulator of price," said Jim Rivait, regional vice-president with the Insurance Bureau of Canada, which supports the rate board's proposal. "Competition doesn't fire on all cylinders when you're looking at an industry-wide approach."
The current system often produces "sticky pricing," Rivait said, as companies will often take the maximum allowable premium increase, rather than reducing rates, because of uncertainty over what the rate board will demand from all the insurers.
The Alberta Motor Association also backs the board's proposal, believing it would allow insurance companies to go after their own target market for drivers.
"If you've got good drivers, you can afford to keep your rates lower,"said Robert Katzell, the AMA's director of claims.
Liberal finance critic Dave Taylor contends the current system isn't benefiting drivers as much as it should. The Grits favour, in principle, public auto insurance like that found in other provinces, and aren't certain the proposed reforms will produce the desired results for motorists.
"There's been, supposedly, a competitive insurance system in this province. It hasn't worked very well for motorists as far as we're concerned," Taylor said. "I don't know more competition is going to result from the proposal."
All sides believe the Court of Appeal case, regardless of the ruling, is likely headed for the Supreme Court of Canada, further delaying any more changes to auto premiums.