Killing the industry that saves lives

Lawrence Solomon

November 12, 2003

One of Canada’s lynchpin industries is at risk. If it goes, Canada’s economy and society will suffer lasting harm and Canadians, as individuals, will suffer mortal harm. I am speaking of the insurance industry, an inconvenient industry for those who are inconvenienced by the truth.

Take nuclear power manufacturers such as GE and Westinghouse. Insurers in Canada and around the world realized early on that nuclear reactors were too risky to insure – a nuclear meltdown or other serious accident could cause hundreds of billions of dollars in damages, quite apart from injuries and loss of life. The GEs and Westinghouses likewise didn’t want to put their own shareholders at risk by self-insuring: As nuclear manufacturers testified, they themselves feared that an accident could bankrupt them. To protect shareholders against the risks that the insurers identified, the nuclear industry successfully lobbied governments to exempt them from liability for the risks that they foist on innocent members of society. As a result, you and other Canadians have no protection in the event of a nuclear accident – check your homeowner’s policy and you’ll see that your government has taken away your rights to compensation in order to allow the nuclear industry to operate unaccountably.

Or take exporters, especially those providing goods to unsavoury projects such as logging Third World rain forests, or to unsavoury dictators such as Saddam Hussein. Private insurers balked at backing these risky ventures, except at sky-high rates that would accurately reflect the extreme risks involved. Exporters – unhappy with this verdict from the marketplace – lobbied governments to create a government insurer that would cover risky export loans, willy-nilly. The result – a federal crown corporation called Export Development Canada that happily backs bad loans, enabling environmentally destructive or ethically challenged projects to proceed without regard to fiscal prudence.

Rapacious industries and heinous dictators aren’t the only ones who lobby governments to evade the insurance industry. Members of the public, too, don’t want to accept the numbers that sit, in black and white and for all to see, on actuarial tables. “The numbers lie,” claim 20-year-old male drivers, who refuse to believe that they represent a greater risk on the road today than they will when they are 30 or 40. “This is age discrimination,” claim 75 and 80-year old seniors, who refuse to believe that they may not be as alert, or have the same reflexes, as when they were 50 or 60.

Politicians then turn their focus away from the numbers on the actuarial tables and onto the numbers at the voting booth. And, when it suits them, they turn on the insurance industry, which in Canada has few friends and many detractors.

Four provinces – British, Columbia, Saskatchewan, Manitoba and Quebec –turned to public automobile insurance in the past to keep premiums low for dangerous drivers. Today, more provinces are at risk. In New Brunswick this week, the Select Committee on Public Automobile Insurance will conclude its hearings. Its purpose is to decide whether the government should expropriate the entire private auto insurance business, or only part of it. Its mandate, incredibly, excludes any investigation that would compare the merits of public versus private auto insurance.

Movements are afoot in other provinces, too, to expropriate the private auto insurance market. This expropriation would be massive: Auto insurance represents more than half of the business of private insurers. And after auto insurance, another unaccountable industry, or another unaccountable group of Canadian citizens, will doubtless emerge to demand that it, too, be allowed to shuck its responsibilities. Private insurers now represent assets of some $66-billion, sales of some $21-billion, and employment of some 100,000. How much of that will remain in several year’s time is anyone’s guess.

Canada is the only country in the developed world that attacks the insurance industry. The last country to turn to public auto insurance –New Zealand in 1972 – has been regretting it ever since. Deaths soared, service declined. The automobile insurance system then endured one revision after another in an attempt to fix its problems. Just recently, it made another revision – after three decades of turmoil, the private sector is being allowed back in.

Some day, the Canadian provinces that went public will revert to an accountable, private system. One recent poll, in fact, shows that residents in provinces that have gone public want out – they want to switch back to a private system. That will be a great day for the great majority of Canadian citizens and Canadian corporations, who would otherwise continue to be subsidizing dangerous driving, and for the Canadian economy, which will then be able to recover some lost ground. That great day, however, will be bittersweet. The lives lost under public insurance, the people maimed, the livelihoods destroyed, will never be recovered.

Lawrence Solomon is executive director of Urban Renaissance Institute and Consumer Policy Institute, divisions of Energy Probe Research Foundation. E-mail: LawrenceSolomon@nextcity.com; Last in a series.

Readers respond:

Letters to the Editor
National Post, November 24, 2003

Larry Solomon manages in his column (Killing the Industry That Saves Lives, Nov. 12) to make a misrepresentation of nuclear liability and its insurance coverage. All Canadians are covered comprehensively for damages from nuclear events by the Nuclear Liability Act. Far from “exempting them from liability,” the act requires all operators of nuclear facilities to be absolutely liable for damages arising from a nuclear incident. By doing so, Canadians are spared the necessity of having to go to court to show who was to blame for an accident; they need only demonstrate injury to person or damage to property.

Hence, the exclusion in insurance policies is essential to avoid double jeopardy. Insurers instead participate in a domestic insurance pool that provides coverage to all licensed nuclear installations under the terms of the Nuclear Liability Act. It needs to be emphasized that through the Act, Canadians receive greater assurance that their claims will be honoured expeditiously than would be possible under tort law.

For more than 40 years, nuclear power has been a safe and reliable source of electricity for the people of Canada.

Colin G. Hunt, director of research and publications, Canadian Nuclear Association.

The rights of Canadians to compensation following a nuclear accident are entrenched in the federal Nuclear Liability Act (1976). The act streamlines the claim process by channelling liability directly to the operator and removing the need to prove negligence.

The operator, in turn, is given a liability cap of $75-million. If this limit were ever reached (there have been no claims to date), the government is authorized to oversee the balance of claims.

Note that the industry’s liability coverage is provided by a consortium of the private insurance industry, and this is precisely why you won’t find “nuclear accident” coverage in your homeowner insurance: The insurance industry is particularly sensitive about indemnifying people twice.

One can debate the level of the liability cap, and such discussion is underway at the federal level. It is irresponsible, however, to report that no protection exists.

Furthermore, to suggest the government allows the nuclear industry, possibly the most regulated sector of the Canadian economy, to “operate unaccountably,” is absurd. The safety and environmental performance of nuclear generating plants are second to none, and a matter of public record.

Jeremy Whitlock, president, Canadian Nuclear Society and reactor physicist, Atomic Energy of Canada Ltd., Deep River, Ont.

Lawrence Solomon responds:
The Nuclear Liability Act does cover Canadians in the event of a nuclear accident, as the letter writers state. What they don’t state is that the act limits the total coverage available to all Canadians to $75-million. Since damages from a catastrophic accident, according to government bodies in Canada and the United States, could exceed $300-billion, the coverage Canadians would obtain amounts to one-quarter of one-tenth of 1% of their loss. Someone who loses a $200,000 home to a nuclear accident would, in other words, be entitled to the grand sum of $50 in compensation, and nothing else. Mr. Whitlock’s tricky language about the government being “authorized to oversee the balance of claims” notwithstanding, the government has no obligation whatsoever to pay Canadians anything else.

For this, we should be grateful, the nuclear industry tells us. We will be “spared the necessity of having to go to court” to collect the $50, and we will get the $50 more quickly than we otherwise might