Alberta's automobile insurance regulator weighs in on care first system
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Summary
Heather Mack, Manager of Education and Engagement at Alberta's Automobile Insurance Rate Board, joins reporter Leah Muschich to discuss why the auto insurance industry in Alberta is not thriving, and what can be done to fix it.
Transcript
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Hi, my name is Leah Muschid. I'm a reporter here at the Western Standard and today we're going to
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give both sides their due by once again discussing Alberta's incoming 2027 Care First Automobile
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Insurance Model. To do just this, the Western Standard has invited Heather Mack, Manager of
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Education and Engagement, to Alberta's Automobile Insurance Rate Board, which is responsible for
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regulating insurance in the province. So thank you again for coming here today, Heather, and being
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with us. And my first question for you is that you've stated that your position is that Alberta
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and auto insurance industry is in fact not thriving. So could you tell us why this is?
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Well, the best example would be to look at our excess profits report that we did this year. This
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is a new authority that we have at the board, which is to make sure that insurers aren't making excess
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profit. And the report found that insurers on average lost about 20% from Alberta auto insurance.
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So that means for every dollar that they're taking in on premium, they're actually spending 97 cents on
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claims and then another roughly 27 cents on administration. So we're finding that insurers
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are absolutely not making profit on the product right now. And we're starting to see other movements
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in the market that tell us it's just not healthy right now.
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Okay, yeah, that makes sense. I also kind of wanted to discuss a little bit about the
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insurers that like left, which was, I wrote down here, Sonnet, S&Y, and Zenith. And apparently
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they have parent companies that still operate in Alberta. So could you tell me how that works? And
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why, in your perspective, this is like, still like not a good sign?
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We haven't had a lot of insurers leaving the market. So even when the small ones do,
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that's a signal to us that something's going on. But really smaller insurers are unable to absorb the
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losses that the large carriers can. They have bigger markets, they may operate in more jurisdictions,
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and they can just handle the bumps that come in the insurance market. So seeing three, even though
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they are smaller players leave the market is still to us a poor sign.
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Okay, yeah. So also, I'm a bit confused about it as well. So this wouldn't be the just them like
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retiring the company name and introducing a new one. This is just them not being able to handle it.
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Yeah, generally, they have to signal to the superintendent of insurance if they're withdrawing
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from the Alberta market. It's a business decision. So ultimately, there may be other reasons behind
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it. Like, maybe some insurers are amalgamating some of their smaller companies. But overall, again,
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this is a loss to those customers in Alberta that were purchasing. So for example, Sonnet was one of
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the very few companies that was like a purely online company, and a lot of Albertans like that.
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And that's no longer available. There aren't that I can think of any insurers where you can fully
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Okay, yeah, that makes sense. Okay, well, then my next question would be about premiums. So you said
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that the cause for the premiums, like driving up premium costs were lawsuits. So could you also explain
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So since about 2020, and there were some previous policy changes by government, but let's go from
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since 2020, we're seeing increased severity, which means the size of the bodily injury claims in
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Alberta. Frequency has been pretty stable, like we're seeing the same number of claims. But they've gone
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from in 2020, the average bodily injury claim was about $90,000. Today, it is 178,000. And even in the
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last six months, it's gone from 109,000 to 178,000. So those claims are what is directly translating
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Okay, then also, would you be able to say like, why? Why is that happening?
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There are more lawsuits in Alberta, for whatever reason, it's a rich product, we see, you know, that it's just
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something that can happen over time, as we see an erosion of things like the minor injury regulation. So it's just a,
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it's a building on a compounding of a problem that has happened. It's happened in other jurisdictions as
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well. And that's where government can look to make reform. Because if you want to lower the price of
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auto insurance, the only thing you can do is pull costs out of the system. And one of the main levers
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government has is going through the litigation, where ultimately, all these costs are flowing, but we're
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not seeing better outcomes for injured drivers because of it is costing a lot of money without that
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Okay, sounds good. Okay, well, then my next question would be, the regulations for the care first system
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have not been completely introduced yet. So then, can you give us an idea of what it's going to look
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like? And also, on top of that, I wanted to know more about the lifetime medical coverage, and if it's
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insured that the person would get said coverage?
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Oh, absolutely. So the regulations coming will deal with the actual coverage, the sub limits, it will deal
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with things like dispute resolution. But today's product, if you're injured in a vehicle, you will
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have $50,000 of coverage for two years. That's the max. Under the new system, it'll be unlimited for your
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lifetime, which is similar to what we would see in Saskatchewan, Manitoba, BC, when it comes to
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accident benefits. That's a significant change. And even though you are getting these improved
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Okay, yeah, that makes sense. So these, the coverage that the person would get under the
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care first system, that would be coming from their own insurance, correct?
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Okay. And so the only thing I would be concerned about is, like, how would they make sure that
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the insurance will pay out? Like, could they litigate, say, if the insurance doesn't want
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Well, let's say, you know, you're receiving treatment, you had sort of a medium, maybe
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a whiplash injury, you're going through treatment, and all of a sudden, your insurer says, you
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know what, you're done, no more benefits. Well, first of all, the law says that the insurer
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must pay out to the point where I'm trying to get the exact wording is, you reached full
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medical benefit. So that will be up to medical professionals. If the insurer then is in disagreement
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with the medical, or your own opinion, because you know your body best, you'll be able to
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take that to a dispute resolution system that will happen within government. So it won't
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be the insurers, it'll be a dispute resolution that's still to be set up in regulations. We
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don't have a whole lot of detail other than what the government's put out to date. There
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will be limited opportunities to sue in certain circumstances. But you would first go through
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dispute resolution. If there's an error in administrative law, then that my understanding
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is would be appealable. But you wouldn't be able to appeal something like your premiums,
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like your premium, you feel like your premiums are too high, it would come down to a decision
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that your insurer is making on your actual treatment. And again, you would be using your
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own medical professionals, your own doctor would be involved in this. You could hire a
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lawyer, potentially, if you wanted to, there's nothing that says that you can't. But it's
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meant to be a process that Albertans can take themselves through. And there will be a brand
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new consumer support function within the government of Alberta, that will help walk you through the
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Okay, that makes sense. And like more on the sorry, it's called like a kind of like a
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tribunal type thing. So we're probably like Albertans will probably know more about it come
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Okay, and probably nothing until then, because they're probably still are they still talking
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about it? Or is it just they're announcing it then?
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Yeah, they're, they're drafting regulations right now. And my understanding is those will be
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public this fall, but they're just the department is consulting right now.
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Okay, cool. So my next question, I guess, yeah, let's just talk more, more about like litigation
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and stuff. So what are the circumstances where Albertans under the care for a system could litigate?
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So the government's indicated that you would be able to sue if let's say the other driver is convicted
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of certain, like certain driving offenses under the criminal code or the Trade Traffic Safety Act,
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those are still being determined, and again, will be in regulation that I imagine will be coming out
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shortly. You would also be able to sue in the event that you need more benefits, let's say you've you've
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reached a sub coverage limit, or out of out of pocket expenses. So let's say you had a catastrophic injury,
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and you find that you need even more than what's in the new system, you would be able to sue the
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other driver in that case. But government still has to put a box around exactly what that means. Because
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the original model of the care first system was based on Manitoba, where there's no ability to sue under
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any circumstance. By allowing even a little bit of litigation, premiums will go up. So it's how much
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do you allow? And where is it beneficial for Albertans to actually still have that ability to
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sue? Because even though people call it a no fault system, it's kind of a misnomer because fault very
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much matters, very much matters in the claims process, and particularly in setting your premiums.
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Because at fault drivers, even under the care first system will be paying more,
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because they'll be penalized by their insurer when they go for a renewal.
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Okay, yeah, that makes sense. Also to clarify, so like, yeah, I'm not sure about this. When like
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drivers say like, it's not their fault. So then no, like the person at fault collides with another
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one, and then they want to still sue the other person for damages. And but the person say there
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was like no one on the scene. So then police did not give that person like a violation, like a ticket or
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something like that. What would happen in that case?
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Well, my understanding is that the system will require a conviction.
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So not just a charge, but an actual conviction under those offenses that the government lays out.
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So it's really to your benefit to ensure that, you know, that the police do respond.
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Okay, so then, I guess the recommendation would be like, whenever you get into a crash, call the
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Yes, you know, and the law, I believe, requires reporting over $5,000. I may have that incorrect
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at the moment. But yeah. And you know what, it doesn't take much to cause $5,000 of damage to a
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That's true. Okay. Oh, okay. I have one more question that just kind of came to mind. Like,
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for example, like BC's, I forget what it's called, like, all care or something, insurance. Anyways,
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they're no fault insurance like system. Do you think at all that it's similar to what Alberta is
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going to put in place in 2027? Or what are like, also the differences that you can tell us about?
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Well, the main difference would be our benefits are slightly higher when it comes to things like
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income replacement, because we, you know, there's a higher average income in Alberta. I'm not
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familiar enough with their system to say how much they allow for lawsuits. But dealing with a public
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insurer is slightly different than we've got a number of private insurers, there's about 29 insurers
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writing in Alberta right now for private passenger vehicle. So the big shift, it was going to take a
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big cultural shift from the insurance companies to go to this new care first model. But we are
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learning from ICBC, and the department has been talking with them, as well as Manitoba and Saskatchewan,
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those being the other care first systems, to get an understanding of the how they handle these
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claims, what kind of training is required. And we're using a lot of their data when it comes to pricing as
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well. Okay, okay, yeah, that makes sense. So anyways, I appreciate you coming and like, being a part of
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this interview. And also, yeah, that's about it. So thank you again, Heather. Good talking with you.