Although I understand the appeal of a simple road map to the perfect system for auto product reform, the reality is far more complex and fluid.

We are never creating a new product in a vacuum of stakeholder interests. The product itself represents an integration of decisions and compromises; like multiple levers operating a complex machine, individual changes must be considered in a context of give and take amongst competing and conflicting policy goals.

Instead of a simple road map then, we should look towards reforming the auto insurance product based upon guiding principles. To do this we must recognize where we are today, and consider options that, if implemented in accordance with the guiding principles discussed, could enhance and improve systems that work.

The auto product is different in every province, as a result of being redesigned or tweaked to respond to political imperatives as they arise. Having been involved in a host of product reform initiatives in many jurisdictions, I have observed that, while the devil is truly in the details, the real imperative is to ensure that the product design decisions are made based on principles of affordability, fairness and indemnification, with the effect of encouraging healthy competition.

The fundamental challenge is how to balance the conflicting requirements that a system be both affordable for consumers, and fair to injured persons. In attempting to find that balance, there are also some considerations to factor in, so that the dynamics of the system will operate in the consumers’ overall interest.

The definition of fair, to injured persons, must mean the application of the principle of indemnification rather than entitlement. This means the goal of the system should be to restore injured persons to their pre-accident state to the extent that is reasonably achievable. While helping people to improve their situation is a laudable goal, it is not—and should not be—the goal, or unintended outcome, of any system of insurance.

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Consumers are best served when companies enthusiastically compete to achieve and retain these business relationships. Competition drives innovation, puts downward pressure on costs, and raises the bar for service. It is unreasonable to expect that businesses will be bullish in an environment where costs are unpredictable, and their ability to price based on these costs is either constrained or threatened by political forces external to the risks being insured.

Predictability is also important, because insurers must sell the auto product to all comers without knowing its actual cost. Yes, we have good estimates, but they will always be wrong. It may take many years to know the actual profit, if any, earned from a specific sale. Hence, being able to predict costs with reasonable accuracy and ease is a desirable feature of a system. In this regard, the insurers’ desire to know what they are likely to earn aligns with consumers’ desire to know what they are likely to have to pay. Keeping transaction costs low, and capable of being controlled, will contribute to predictability, to the benefit of both consumers and insurance company shareholders.

To be fair, the system must be seen to be fair by consumers, and this is only possible if the system is capable of being understood. A degree of simplicity, or at least the absence of complexity, is a key attribute in fostering the confidence and trust of consumers. As well, other measures in place to maintain consumers’ trust must be transparent, so that conflicts of interest or other potential risks to their interests are revealed and understood. Fairness also requires smooth and timely delivery of accessible benefits, so that those injured can proceed with their recovery, not battle the system to be indemnified for the economic losses associated with their injury.

With the above discussion in mind, and accepting that we are not starting from scratch in any jurisdiction, let me offer the following:

In Ontario, failure to recognize the desirability of increased tort will likely result in a further patchwork of responses to areas of abuse. The answer likely lies in a co-operative approach with the legal community plaintiff and defence, set against the principles laid out in this discussion.

In Nova Scotia, I believe the approach adopted in 2003 is wise and should be confirmed by government. If the legislature won’t endorse this approach then let’s stop arguing amongst ourselves and working against the will of the people, and press on to find a viable solution.

Finally, regardless of the ultimate court victor in Alberta, we must put into place a new approach for the province: one that better balances the interests of all parties. We may continue to disagree about the past but it’s time to move forward.

Achieving a balance between what are ultimately conflicting priorities is not easy and, regrettably, we have not achieved the ideal in any jurisdiction. Nevertheless, it is surely worthwhile to seek a common set of objectives in support of affordable, fair systems that are truly aligned with consumers’ interests. Only when this is achieved for consumers, can the interests of all other legitimate stakeholders be properly addressed.

George L. Cooke, President & CEO, The Dominion