Thursday, July 31, 2008

Private Insurance Is Off The Rails

Private Insurance, such as what we have in Alberta, has clearly lost its way. As a result of killing a brain dead law that punished accident victims to protect the financial interests of big insurance companies.

Well, today's announcement of a minimum 5% hike in automotive premiums across the board in Alberta tells us a great deal about how greed driven this industry really is:

During public hearings held in June, the Insurance Bureau of Canada asked the board to hike premiums by 37 per cent, which would have meant a jump of up to $200 a year for the average driver.

Insurance companies said the marketplace is unstable right now in the wake of a court ruling earlier this year when a judge struck down Alberta's $4,000 cap on non-pecuniary damages for some soft tissue injuries.

The market is "unstable"? What the heck does that mean? With over 3 million inhabitants, a good proportion of which drive, it's hard to imagine how there's an instability in the market in any way. There might be an uncertainty, even that strikes me a something of a crock in the first place, since Alberta is hardly the only jurisdiction in Canada with similar legal issues.

The fact that the industry asked for 37% hikes, is a sign of pure greed. Insurance companies have become more about skimming the margin on the investments they make with premiums instead of about the 'shared risk' model that was the original intent of the business model. These days, an accident tends to result in a jump in premiums which mysteriously is awfully close to the cost of borrowing the money to effect repairs directly - in essence the insurance companies are no longer in the managed risk game, but are in the money lending business.

When the Kleinosaurs decided not to regulate the insurance industry, but rather to regulate the victims of accidents instead, it signalled to the industry that Alberta's politicians were no longer going to represent the interests of Albertans, favoring instead the monetary interests of big money.


VĂ©ronique said...

I'm so happy we have a crown corporation for auto insurance. Despite recent problems (just a bit of corruption), overall it's a great system.

Anonymous said...

Insurance should be completely unregulated and up to the free market. I also agree that the $4,000.00 cap was bogus - you could get injured in a slip and fall and not face the deductible but if you were so unfortunate as to get injured in a car accident that was all you got.

I've lived in both BC and Saskatchewan. Monopolistic, public insurance there serves no one's interests - the consumer has no choice if they do not like the insurance company.

MgS said...


Unfortunately, because automotive insurance is required to be carried by law - there is no such thing as a "free market" in this case.

The insurance companies know full well that they have a guaranteed market, and one that is fundamentally captive.