This article originally appeared in the Financial Post. Below is an excerpt from the article, which can be read in full here.
By Jack Mintz, February 21, 2023
Canadians feeling the pinch of high prices want their politicians to take immediate action to relieve the pain. The simple-minded policy is to cap prices. Temporary price freezes have been suggested for cell phone charges, gasoline and food products, to name a few. Don’t do it, governments! Be smart: Avoid price controls and, if you feel you really must act, provide one-time grants or tax relief to cash-strapped consumers.
Even in Alberta, with its well-known entrepreneurial, competitive spirit, politicians have succumbed to populist, Soviet-style price controls. At the end of January, Matt Jones, minister of affordability and utilities — yes, we’ve got a department by that name! — couldn’t resist trotting out an auto insurance premium freeze until the end of 2023 to help Albertans cope with inflation. It was a shock for property insurance companies that the United Conservative Party government would re-introduce a failed NDP policy that in 2017 froze insurance premiums for two years.
The NDP freeze did little in the end. With margins being squeezed by rising auto repair and personal injury costs, insurance companies had to cut costs by, for instance, denying high-risk drivers insurance or dropping optional coverage. Once the price cap was lifted, insurance premiums soared, increasing by over 10 per cent as companies that had elected to stay in Alberta — not all did — made up for their rising car repair and personal injury costs during the freeze. After the Kenney government introduced reforms in 2020, insurance premiums settled down to a reasonable rate of increase: just 2.8 per cent in 2022 compared to Canada’s 6.9 inflation rate.
***TO READ THE FULL ARTICLE, VISIT THE FINANCIAL POST HERE***
