Debate rages on about whether the Alberta government should change our auto insurance to a no-fault system.
A no-fault system is pushed hard by insurance companies because it would grant them unprecedented control over how insurance operates in Alberta. Under this system, there would be no more recourse for consumers to challenge insurers in court – whatever the insurance company decides about someone’s injury resulting from a car accident would be final. This would save insurers money as they could low-ball consumers with impunity. The most significant promise from insurers is that they would use these newfound savings to lower premiums for consumers.
Experience in the US and other provinces shows that no-fault insurance doesn’t reduce premiums; it leads to higher costs, fewer protections for consumers, and no accountability for bad drivers or insurance companies.
No-fault insurance is standard with government-run insurance programs (think BC or Saskatchewan). In government-run systems, no-fault insurance can lead to lower premiums. This is because the government can pass on any savings directly to consumers, as it’s not looking to make a profit.
But in private insurance markets, savings are taken as new profit for insurers. This is why Ontarians who have private, no-fault insurance pay more for auto insurance than anyone in Canada.
It’s improbable that the move to a no-fault system lowers our premiums. In 2003, Colorado switched back to an at-fault system after years of no-fault. After 4 years under the at-fault system, premiums had dropped by 32%.
Another horror story? In Michigan last July, some people even saw their rates automatically increase when their premiums got renewed right after the move to a revamped no-fault system.
Broadening benefits to everyone in an accident without regard for fault greatly increases the pool of those receiving benefits and produces more claims. Yet, in the face of more claims (no matter if actual or perceived), insurance companies raise premiums and offer less coverage in order to protect their bottom line.
The primary reason why premiums get so high is moral hazard and the perverse incentives offered by no-fault. Research describes a “lottery mentality” associated with no-fault thresholds and a claiming culture arising from providing benefits to both at-fault and innocent drivers.
The takeaway? No-fault won’t save Albertans money. It’s only here to increase the insurance companies’ bottom line.
Let your voice be heard. Send a letter to your MLA and the Minister of Finance.
We want to know your accident story. Were you able to secure fair compensation? What happened? How do you feel about the potential loss of protections if Albertans can no longer sue at-fault drivers?
Fill in the form, and we will keep you up-to-date on developments.
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FAIR Alberta is a coalition of concerned consumers, medical professionals, injured Albertans, and members of the legal community who are committed to protecting the rights of individuals that have been injured in motor vehicle accidents.
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