Stuck in the Middle

The New West Partnership Trade Agreement (NWPTA) between Alberta, British Columbia and Saskatchewan came into effect in July 2010. So far, there appear to be more questions than answers when it comes to key issues facing insurance brokers – particularly in Alberta – as a result of the agreement. For example, there is a sense among some Alberta brokers that competitors will gain full access to their home market, yet they will continue to face trade restrictions in their neighbouring provinces.

Formerly known as the Trade, Investment and Labour Mobility Agreement (TILMA) between Alberta and B.C., the NWPTA was expanded to include Saskatchewan as a result of discussions in 2009 with the respective provincial premiers. The stated aim of the new agreement is to create the largest and most open interprovincial marketplace in Canada by eliminating obstacles to trade, investment and labour mobility.

How this accord will affect the insurance marketplace in two crucial areas – access to public auto insurance and credit union regulation – is a question many brokers in Alberta are eager for governments to answer.

Public Auto

The most obvious concern is how brokers in the energy province will access government-run auto insurance systems east and west of them.

“Free trade for property and casualty distribution becomes difficult, if not impossible, for Alberta to accomplish,” says Harold Baker, executive director of the Insurance Brokers Association of Alberta. “Simply put, it is impossible for private sector business to compete with a public sector that has a monopoly on product and distribution for one or more types of insurance.”

While Alberta brokers can, and have, bought brokerages in B.C. and Saskatchewan to access the public auto insurance in these provinces, the availability and cost of an Insurance Corporation of British Columbia Autoplan or Saskatchewan General Insurance contract represent distinct trade barriers, according to the IBAA. In B.C. in particular, a moratorium by the ICBC on Autoplan contracts means that interested parties must “bid” on contracts that come up for sale, often well over $500,000.

Chuck Byrne, executive director of the Insurance Brokers Association of British Columbia, says his association supports any agreement that increases trade between provinces and encourages economic growth. He adds the NWPTA will likely have little effect on B.C. brokers operating inside or outside the province. In terms of his provincial counterparts to the east, Byrne notes: “There are lots of Alberta brokers who own B.C. brokerages. I expect that will continue in the future.”

Ernie Gaschler, executive director of the Insurance Brokers Association of Saskatchewan, says his association “does not have a formal policy on the trade agreement at this time.”

Credit Unions

Another issue troubling Alberta brokers is the potential for expanded powers of credit unions to retail insurance products. In the province, credit unions are restricted from selling insurance, either directly or through a subsidiary. That is distinct from B.C. and Saskatchewan, where credit unions are allowed to own insurance brokerages and sell or promote insurance products, under certain conditions.

“We would say that the ‘ask’ of Alberta credit unions has become louder and more aggressive as we expected it would,” notes Baker. “What Alberta credit unions want is the government to expand their business powers. One such power is the ability to sell p&c insurance products at their branches. Some credit unions are actively trying to do joint ventures with their B.C. brethren in preparation of the government changing Alberta laws.”

These trends are a concern to Alberta brokers, who, according to Baker, have operated fairly under a set of regulations established by the provincial government. “All we ask is that government maintain the existing framework,”
he says. “Both the credit unions and our business communities have built themselves as the government has mandated. To make significant changes to our business environment, the government must then find a way…to ensure a competitive level playing field remains and that fee trade is not only free but equal.”

As a party to the NWPTA, the Alberta government will be under pressure to harmonize financial regulations with the other provinces as closely as possible. While the agreement is currently in effect, it will not be fully implemented until July 2013. None of the provincial governments has announced any changes to financial services regulations.

“The government of Alberta sees free trade as the pathway to a powerful economic three-party community in Canada,” Baker concludes. “We hope it is not going to be done with a ‘damn the consequences’ approach.”