Система Care-First в Альберте не приведет к снижению страховых взносов, а лишь перераспределит выплаты

Opinion: Alberta's Care-First insurance savings don't add up In 2027, Alberta’s automobile insurance will undergo the most significant change in its century-old existence — from the current system to no-fault. Yet neither the government or the insurance industry has made a serious attempt to inform drivers about what a no-fault system is, nor how it will differ from the current system. This silence does not arise because the effects of no-fault are too complicated for the average driver to understand. Consider the following simple example of a common insurance claim. Two drivers have been involved in an automobile accident in which each driver has suffered injuries that resulted in $100,000-losses of earnings. In the current system, the driver who was at fault for the accident — for example, because he was speeding, intoxicated, or driving distracted — will receive what are called Section B benefits from his own insurance company, perhaps $10,000. The driver who was not at fault will be fully compensated for his loss, $100,000, from the at-fault driver’s insurer. The sum of those payments, $110,000, will then be passed on by the insurance industry to drivers through their premiums. As insurance premiums under this system have been rising, the government has decided to introduce a radical overhaul, which it calls Care-First. Under this system, injured drivers will no longer have to sue the at-fault driver’s insurance company to obtain benefits. Instead, every injured driver will be compensated by his or her own insurer, regardless of fault. Hence, the name “no-fault” insurance. But notice, if both drivers in the example above were compensated for the full value of their losses — $100,000 each — total costs would almost double from the current level of $110,000 to $200,000. How can the government argue that premiums will decrease? The “answer” comes from a quirk in the current system. In order to receive compensation for the full value of his $100,000 loss, a driver currently has to prove that someone other than himself was at fault for his injuries. To do that, he will have to sue the at-fault driver. But suing a driver usually involves hiring lawyers, and their fees are generally 20 to 30 per cent of any amount that they obtain for their clients. So, if lawyers charge 25 per cent, the driver who was not at fault in the example above would benefit by only $75,000 ($100,000 minus 25 per cent). In a no-fault system like Care-First, however, every injured party will be compensated without having to hire a lawyer. So, even if benefits under Care-First were reduced from $100,000 to $75,000, drivers would be just as well off as they would have been under the old system. It is this lower level of benefits that will be paid under Care-First. And because insurers will now pay only $75,000 to drivers who are not at fault, they will be able to put the $25,000 saved toward reduced premiums. But what about the drivers who are at fault? Under Care-First, whatever amount is paid to drivers who are not at fault will also be paid to at-fault drivers — because Care-First does not ask whether injured parties were or were not at fault. So, although the amount that is paid to the driver who is not at fault will decrease from $100,000 to $75,000, the amount that is paid to the at-fault driver will increase from $10,000 to $75,000. The total payment under Care-First will be $75,000 times two, or $150,000 — 37 per cent more than the $110,000 that was paid under the old system. Although Care-First “saves” the legal fees that would have been paid by drivers who are not at fault, those savings will be far outweighed by the increase in benefits to at-fault drivers — from $10,000 to $75,000. Indeed, premiums would only fall if the benefits payable under Care-First were reduced to a level below $55,000 (half of $110,000). In effect, the government is proposing to pay for the increased payments to at-fault drivers out of reduced payments to innocent drivers. Christopher Bruce is a professor emeritus in the economics department at the University of Calgary. He was former president of consulting firm, Economica, which provided expert economic evidence concerning damages in automobile accident lawsuits. Letters welcome We invite you to write letters to the editor. A maximum of 150 words is preferred. Letters must carry a first and last name, or two initials and a last name, and include an address and daytime telephone number. All letters are subject to editing. We don’t publish letters addressed to others or sent to other publications. 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