The Alberta government should push forward with its plans to review business insurance while auto insurance premiums are frozen for a
year, says the head of the
Alberta chapter of the Canadian Federation of Independent Business.

“We feel that the province should go ahead with the
business review anyway, as many of the issues are different,” said Dan Kelly, the CFIB’s western vice-president.

Last week, the provincial
government announced it will introduce legislation to make auto rates more fair.

Young drivers with good driving records, seniors and other Albertans paying unfair insurance rates are supposed to benefit from the reforms, which the government says will save $250 million to be passed on through lower premiums.

A compensation cap of $4,000 will be introduced for minor sprains and strains, as defined by medical experts, and only for pain and suffering.

But a spokesman for the finance ministry, which oversees insurance, said the government is sticking to its plan to change auto insurance rules before it deals with business insurance.

“We’re trying to tackle one issue at a time here,” said Jerry Bellikka. “Auto insurance is the one that affects the most Albertans right now – and the one that we’re trying to address head on.”

But the CFIB’s Kelly said there is concern that the delay in reviewing business insurance may cause the Tories to rethink their plan to review commercial coverage.

“Our sense is that government is hoping that improving market conditions – a return to profitability, better investment revenue – may cause this (business insurance) problem to go away,” said Kelly.

Ideally, the government hopes the market can correct the problem itself. In a recent
interview, Bellikka said the province is aware of business operators’ concerns – and is willing to help, if necessary.

“If the suggestion is that we’re just sitting idly by, I don’t know how fair that is,” said Bellikka.

The CFIB and the Consumers Association of Canada have also called on the federal government to consider business insurance rule changes, but Bellikka said he didn’t want to comment on that issue.

What’s the Alberta government’s message to business operators looking for new insurance rules?

“You’re not alone in this,” said Bellikka, referring to the fact that many large insurers operate globally, adding businesses everywhere in Canada and in most U.S. states face the same issue. “This is a continent-wide situation. There’s going to have to be some kind of continent-wide solution to it. Alberta can’t act in isolation.”

While basic auto insurance is regulated, the province does not require businesses to have insurance. But many businesses are still legally required to have
liability, property and other forms of coverage through contracts, loans, leases and other obligations between parties.

Bellikka said the government has not discussed regulating business coverage. If businesses are going to pay less for premiums, he said, there must be some kind of change within the insurance industry.

But Kelly said it’s important that the auto rate freeze be monitored to ensure that insurance companies don’t simply raise business insurance premiums to recoup lost revenue on the auto side.

Insurance brokers and carriers have blamed rate increases on the September 11, 2001, terrorist attacks, the slumping stock market (which affects investment profits that are used to offset premium costs and has since shown signs of recovery), and an increase in personal injury claims, fraudulent claims and re-insurance – the premiums that insurance carriers pay to insure themselves.

But Insurance Bureau of Canada (IBC) figures show that insurance companies earned $644 million in profits in the second quarter of this year and $466 million in the first quarter – more than in all of 2002.

Kelly said the auto insurance issue shows the need for clear expectations and input from consumers to develop recommendations that will be mutually acceptable to all parties.

“We shouldn’t forget government’s role in this as they impose an extra (auto) insurance-premiums tax as well as impose a number of regulations on the industry,” said Kelly.

The province receives three per cent of auto premiums – about $60 million per year – but has no plans to scrap the tax.

Jim Rivait, an IBC regional vice-president, has accused the CFIB of jumping on the insurance bandwagon in wake of the controversy surrounding auto insurance.
Contending that the market corrected itself after premiums were too low, he has argued that, in most cases,
several insurers provide a particular type of insurance – so competition works.

He has also said the IBC is willing to work with “particular pockets” where premiums are too high – but it has to hear and know about them first.

Ken Pattenden, president of Taco Time Canada Inc. and chairman of the Canadian Franchise Association’s prairie region, also opposes the idea of a government review.

“The free market is the
better way to go, in my mind,” he said.

Pattenden said Taco Time has only faced one price increase in the past seven or eight years of doing business with the Co-operators, which provides coverage itself rather than reselling the package. Taco Time
franchisees have the option of buying into $5-million group coverage that costs $1,000-$1,400 per year, depending on each outlet’s location.

Franchise association members use a variety of insurance packages, either in conjunction with franchisors or independently, depending on the specifics of each franchise agreement, said Pattenden. In all cases, they are required to have some form of business insurance.

Contending that a government review won’t change the way insurance companies operate, because the Alberta market is too small, Pattenden said companies with similar risks should go in together on policies to get better deals.

“Businesses just have to be more astute in negotiating insurance,” he said.