While Jason Kenney is running all over the province trying to convince UCP members he’s there for them, the actions of his government in the House last week tell a different story.
But before we go there, let’s play a game. I’ll say a word and you say the first thing that pops into your head.
Nothing? You don’t even know what it means? You didn’t demand Kenney get you some when he got elected?
Okay, let’s try another one.
Whoa, steady on! You don’t like the fact your premiums have jumped 10, 20, 30% or that the insurance companies pulled in $385 million more in premiums than they paid out in 2020 or that they made over $1 billion in profit last year.
Right, hold that thought while we take a brief look at reinsurance. The thing no one heard about back in Kenney’s promise, promise days.
Reinsurance and Bill 16
The Kenney government says oil and gas companies and the industrial sector are having trouble accessing reinsurance. So last week they tabled Bill 16.
Big companies buy three levels of insurance: primary insurance which kicks in first, excess insurance which tops up primary insurance when primary isn’t enough and reinsurance when both the primary and the excess insurance limits are exhausted. BP’s Deepwater Horizon well leak is the kind of loss that would be large enough to trigger a reinsurance payout.
Reinsurance is provided by a number of insurance companies who are collectively responsible for the coverage. There are about 50 such companies around the world and with the Big Five (companies like Lloyds of London and Swiss Re) taking the lion’s share of the market.
The Kenney government says these companies are less inclined to offer reinsurance to oil and gas companies because of the risks posed by climate change. Supply is scarce, prices are high and rather than let Adam Smith’s invisible hand determine how this will shake out, the government proposed Bill 16.
Bill 16 will (1) give the province the power to license reinsurance companies, (2) make it easier for Alberta insurance companies to access unlicensed reinsurance companies, (3) change the tax rate on premiums and (4) allow companies that have captive insurance companies elsewhere (these are a form of self-insurance) bring their captives back to Alberta.
The government hopes that as a result of Bill 16 the excess capital circulating in the oil and gas sector will be pooled by oil and gas companies to create local reinsurance companies.
One thing is for certain, Bill 16 has given Alberta’s insurance industry a new shiny toy.
Which brings us back to our little game: Q: car insurance, A: Grrrr.
We don’t know whether oil and gas companies that are enjoying windfall profits and benefiting from a 8% corporate tax rate will, as the government puts it, pool some of this capital to form their own reinsurance companies. We don’t know whether Alberta insurance companies will go hog-wild trying to be one of the global players in the reinsurance marketplace.
However we do know that the government went to considerable time and effort to create legislation that will give them the tools they need to seize this opportunity if they so desire.
The only stakeholder (to use the government’s vernacular) that the government did not take into consideration when it comes to insurance was ordinary Albertans.
Notwithstanding a deluge of emails from Albertans complaining about the increase in their car insurance premiums, the Kenney government did nothing to lighten the insurance burden for Albertans who are struggling with car insurance premiums that jumped by as much as 30%.
The NDP raised this issue in the House, pointing out that only 10% of the auto insurance companies requesting rate changes had asked for a rate reduction. The NDP asked how many more increases it would take before the Kenney government finally changed course.
Mr Toews ignored the question about the harm the UCP’s elimination of the cap has done to Albertans, stating that the NDP’s 5% rate cap would have led to the collapse of the auto insurance sector, allowing the NDP to nationalize it.
This echoed Jason Kenney’s comment that the NDP wanted to implement a “Soviet-style insurance system.” When NDP MLA Shannon Phillips told Kenney the conservative governments in Saskatchewan and Manitoba had public insurance systems, Kenney responded with some nonsense about Justin Trudeau’s (non-existent) truck tax.
Leaving aside the partisan rhetoric, actions speak louder than words. This week the UCP government demonstrated it will take care of big corporations and the insurance companies. The rest of us are on our own.
Perhaps we need better lobbyists. Does anybody have Nick Koolsbergen’s number handy?