Edmonton, Alberta – A new study for the Canadian Bar Association (CBA) has found that the automobile insurance industry would continue to be highly profitable, even if the $4,000 cap on payments for soft tissue injuries in Alberta were removed. The study, entitled Alberta’s Minor Injury Regulation: Automobile Insurance Profits, Premium Rates and Costs, was prepared independently for the CBA by Economica Limited.
“This report supports our view that the cap denies Albertans the right to access justice,” said Tom Achtymichuk, Q.C. of the CBA. “It demonstrates the insurance industry was profitable and that insurance claims were not out of control prior to introduction of the cap. Even with no cap on damages, the auto insurance industry would still earn reasonable profits.”
The report found the rate of return on equity for Alberta automobile insurance averaged six per cent, or nearly $70 million, from 1998 to 2002. It then jumped to more than 20 per cent in 2003, prior to the Minor Injury Regulation. Bodily injury and property damage claims each rose by roughly 20 per cent per vehicle from 1996 to 2003, while premiums rose by nearly 65 per cent, an increase that cannot be explained by changes in administrative costs or rates of return on insurers’ investments.
The Minor Injury Regulation legislation was introduced by the provincial government in October 2004. In February 2008, it was found to be in violation of the Canadian Charter of Rights and Freedoms by Associate Chief Justice Neil Wittman. Shortly thereafter, the Alberta government made a decision to appeal the ruling.