Auto insurance overhaul likely for Alberta. How far will UCP go?

In a day thick with competing actuarial interpretations and estimates of car insurance models, one particular figure made Finance Minister Nate Horner's ears perk up last Monday.

Five per cent.

That's the proportion of Albertans' average disposable income that now goes to auto insurance premiums, a provincial consultant told Horner and a room full of other government officials, insurers, lawyers and other stakeholders at a summit on auto insurance reforms.

Previous reports, a decade or more ago, pegged the proportion at 2.7 per cent. But premiums have taken a much bigger bite out of Alberta bank accounts in recent years, racing from an average of $1,316 in 2018 to an estimated $1,670 last year — up by one-quarter, in only five years.

Premier Danielle Smith's government has capped rate increases for good drivers, but Horner acknowledges that's a lid on a boiling cauldron of rising repair costs, higher claim values and an outsized car-theft problem.

Something's gonna blow, be it insurance firms bailing on an uneconomic province or premiums surging again if Horner lifts the cap without tending properly to that bubbling brew of factors.

Add in a premier with a yen for bold, major changes — a drawn-and-quartered Alberta Health Service and an Alberta Pension Plan, anybody? — and you have the most fertile environment for a big auto-insurance system redesign in years, rather than the tinkering governments have done in years past.

"I think we have to do more. That's what the premier's asked us for," Horner told CBC News in an interview this week, after the private summit his ministry organized as part of promised consultations.

Reports the government commissioned even looked seriously at the insurance solution that's long seemed a third rail for Alberta conservatives — public auto insurance like they have in Manitoba, Saskatchewan and British Columbia.

And what did those reports say? Full coverage could cost roughly $765 less per year under a public regime like Alberta's western neighbours have, according to one study by Oliver Wyman.

Why? You create larger insurance pools, centralize the staff, simplify claims and eliminate the need for corporate profits.

With the cost of living high on Albertans' minds, that's arithmetic Horner can't disregard.

"The way to maximize savings is to create the monopoly," the minister said about a government-run system. "If you go part way, you always diminish savings."

But premium savings isn't the only part of this complex picture Horner is looking at, as steward of Alberta's finances. The risks when the insurance market dips would suddenly all be assumed by government.