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A hard left for Alberta insurance?

Albertans shouldn't be swayed by promises of cheaper prices

Peter Jaworski - August 2, 2004

Apparently Ralph Klein's decision to start centrally planning Alberta's car insurance industry in June wasn't radical enough for some. The province may just speed past Klein's decision to control insurance premiums by capping how much injury victims could receive, and veer into full fledged nationalized auto insurance. At least, that's if the Liberal Party of Alberta has their way. "We've been advocating a B.C. model of public auto insurance for quite a long time now, and we're launching a public campaign this summer to build public awareness of the benefits of public auto insurance," says Kevin Taft, the Liberal leader.

He doesn't foresee any roadblocks to this initiative and neither does Scott Sinclair, senior research fellow at the Canadian Centre for Policy Alternatives, a left-wing think-tank. Sinclair says auto insurance of the government-run variety is "more fair, more workable and more efficient." And, of course, there's the big selling point: price. "The evidence is very, very clear," says Taft: government-run auto insurance will be lots cheaper.

Not so, says Mark Mullins, director of Ontario Policy Studies at the Fraser Institute, the Vancouver-based free market think-tank, who warns that Albertans are being sold a dangerous and expensive lemon. There are loads of hidden costs in a socialized system, says Mullins. For one thing, government-run insurance schemes misprice premiums so that higher-risk drivers, who would normally be charged more, get a break, while low-risk drivers pay more, all in the name of equalization. The result, says Mullins, is that you "encourage having too many people on the road who otherwise wouldn't be driving as much or driving at all, and you end up with more collisions." Statistics show there are far more claims per car, per person, per driver in provinces with nationalized insurance, such as B.C., Manitoba and Saskatchewan, than in provinces with private insurance.

In addition to the added health-care costs of soaring injuries, Brian Lee Crowley, president of the Atlantic Institute for Market Studies, says it can be expensive for provinces to get into the insurance business. There are start-up costs and administration costs, as well as the opportunity costs to the province of foregone investment and the economic contribution that's wiped out by eliminating an entire private industry.

Will Alberta voters be swayed by promises of cheap insurance? They shouldn't be, if they do their homework, says Mullins, and look to their neighbour. "You just can't miss it," says Mullins. "B.C., by far, is the most expensive system."

More articles by Peter Jaworski