As auto and business insurance premiums skyrocket in Alberta and other provinces, insurance companies are poised to earn near-record profits this year.

Insurance Bureau of Canada figures show that insurers – the companies that provide coverage – earned more in the first quarter of this year than they did in all of 2002.

According to the IBC’s June Perspectives newsletter, the industry earned $396 million in the first quarter of 2003, compared to $312 million for all of 2002.

The insurance industry’s gain on investment in the first quarter of this year, $149 million, also exceeded the total 2002 gain of $137 million.

“It is anticipated that results for the recently concluded second quarter of 2003 will be even more impressive for insurers, and may well put the industry on pace for its highest net profit in history,” Mark McCourt, an Edmonton injury accident lawyer, wrote in a brief submitted July 14 to the provincial government’s standing policy committee on economic development and finance.

The companies’ profit record is $2 billion, set in 1997, said McCourt.

In June, the IBC, which represents 90 per cent of insurance companies and serves as the provincial government’s official auto insurance statistics agency, said that auto insurance premiums rose 15.4 per cent in Alberta between March 2002 and March 2003.

However, Statistics Canada asserts that Albertans’ auto insurance premiums rose 57 per cent between December 2001 and December 2002.

But Jim Rivait, the Insurance Bureau of Canada’s prairie region vice-president, said people must remember that $369 million profit is spread over approximately 220 companies in Canada, and covers all lines of insurance.

He said the first-quarter profit does not necessarily indicate a trend.

Contending that companies have lost money on auto insurance for the past 15 years, he said the industry won’t lower premiums until claims costs for minor soft-tissue injuries are brought into line.

“Yes, things have been better, but governments haven’t liked what companies had to do to make things better,” said Rivait. “Premiums went up, underwriting went up and that’s where we got the situation today.

“Companies took the only steps they could take to come anywhere near profitability.”

Alberta insurers’ profit figures for the first quarter are not yet available, said Rivait.

But McCourt said the IBC profit figures show that Canada’s insurance industry, which depends on investment income to offset underwriting expenses, is recovering from record losses in 2002 and does not need to hike premiums, especially for young drivers under 25, to cover rising claims costs.

Insurance brokers and carriers cite the Sept. 11, 2001, terrorist attacks, the slumping stock market (which affects investment profits that are used to offset premium costs), and an increase in personal injury claims, fraudulent claims and re-insurance – the premiums that insurance carriers pay to insure themselves – as causes of the increases.

But McCourt argued that the Alberta insurance industry’s contention that the spike in auto premiums since Sept. 11, 2001, results from a similar spike in claims costs, or previous years when premium increases did not keep up with claims increases, is “demonstrably false.”

“In Alberta, it’s the premiums that have been outpacing claims in for whatever period you want to look at,” said McCourt, who is opposed to a cap on minor injury claims.

According to IBC statistics, Alberta auto insurance premiums rose on average to $942.97 in 2002 from $798.91 in 1998. However, the average cost per claim only rose to $729.06 from $692.83.

Last year in Alberta, according to IBC figures, 81 cents of every dollar in premiums was used to pay claims costs.

Last month, New Brunswick Premier Bernard Lord, who narrowly retained his majority government after voters balked at rising auto insurance premiums, introduced fines for insurance companies that fail to keep premiums affordable for young drivers.

McCourt said such a drastic program is not necessary here if the province’s Auto Insurance Board (AIB) would do its job and say ‘no’ to premium hikes. Last year, he noted, the AIB, which sets and regulates insurance rates for compulsory auto coverage, approved 57 of 59 applications for premium increases.

Edmonton NDP MLA Brian Mason accused the industry of blaming victims of collisions for their injuries.

He said Albertans should not have to compensate insurance companies for investment losses.

“The losses they have incurred are due to a known business risk. Investments don’t always pan out,” said Mason in a news release.

That argument is fair, said Rivait, but insurers should not have to rely on investment income to make a profit. “It’s gotta go two ways,” said Rivait.

“Relying on investment income to subsidize claims costs is the same as the government budgeting on $40-a-barrel oil. You do that, and in a good year you look smart. But when it’s only $28 and you budgeted on $40, you’re down a bit. So you can’t rely on an ongoing basis to have investment income used to subsidize claims costs.”

The Alberta government has already announced that it will introduce an affordable entry-level program for new male drivers under 25, who along with seniors are most likely to be involved in collisions, by the end of this year.

A committee made up of insurance industry players and insurance-company and corporate lawyers from Alberta, B.C., Manitoba and Quebec, headed by Calgary MLA Rob Renner, is formulating recommendations on which the new rules are to be based.

After the new auto insurance rules are introduced at the end of this year, the province will attempt to adapt them for commercial insurance.

“It’s too high for everybody, but again, insurance is simple,” said Rivait. “It costs what it costs. You put money in and you pay money out. If you don’t take in enough money to pay the costs, you have to do something.”

Accusing McCourt of lobbying to preserve his contingency fees rather than assist victims, Rivait suggested that hundreds of millions of dollars paid out in legal costs and re-insurance fees have spiked premiums.

“Look at schools,” he said. “We can’t even take kids on field trips because of fear of liability. Do you think a company has any less liability than a school board?

“Everyone is suing. That’s how they get money. They sue. Some of these things are just outrageous.”