Alberta drivers face auto insurance hikes

Jul 31st, 2008 | By Hot News Reporter | Category: Insurance Today

Albertans will learn today whether they’ll shell out more for auto insurance, after proposals to hike premiums as much as 37 per cent were made to a panel deciding what drivers should pay.

Premier Ed Stelmach said Wednesday he expects the province’s Auto Insurance Rate Board will take a “very pragmatic, responsible approach” and shy away from proposing a 37 per cent jump for Nov. 1 — which would see the average Alberta driver pay $225 more a year.

“I don’t anticipate such a large increase, but we’ll have to wait until tomorrow,” Stelmach said in Calgary.

According to government sources, Finance Minister Iris Evans has privately made it clear she won’t allow an increase in the double digits. If the recommendation is for a hike of 10 per cent or more, sources said Evans will intervene.

The auto board’s decision was to be released at 11 a.m. today. It comes after two days of hearings on insurance premiums last month, a debate dominated by insurers and lawyers.

Auto insurance companies argued they’re facing higher costs that demand higher premiums. They pointed to a court ruling in February that struck down the Alberta government’s $4,000 compensation cap for minor soft-tissue injuries, such as whiplash, suffered in traffic crashes.

The ruling has thrown a massive wrench into the market, said Jim Rivait, a vice-president with the Insurance Bureau of Canada. He contends insurance companies’ costs will soar if the province loses an appeal to reinstate the cap.

The government’s appeal is slated for September. If the case gets to the Supreme Court, a final judgment is unlikely until 2010.

“Hopefully (today’s) decision recognizes the uncertainty we are under,” Rivait said Wednesday. “Do we know definitely for tomorrow what’s needed . . . before we have the decision of the court? Not exactly.”

“However, potentially there could be a need . . . for 37 per cent.”

Opposition parties are calling on the auto board to hold the line on insurance premiums.

“The insurance companies are making huge profits and there’s no justification in my view for an auto rate insurance increase,” said NDP Leader Brian Mason.

Edmonton Liberal MLA Hugh MacDonald argues, like Mason, that insurance companies can afford to absorb extra costs.

“Consumers, especially in this province, are faced with escalating costs for everything, whether it’s for fuel, for electricity or for food,” MacDonald said. “Consumers need a break.”

At last month’s hearings, the Canadian Bar Association released a report claiming insurance companies made more than 20 per cent profit in Alberta between 2003 and 2006. The report argued injury claim costs were never out of control. The insurance bureau has disputed the report’s findings.

The auto board heard several arguments for raising premiums on Nov. 1, but also got an analysis suggesting rates should decrease 3.2 per cent even in the absence of a soft-tissue cap.

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