Free But Unequal

The governments of B. C. and Alberta in April 2006 signed an agreement designed to promote free trade between the provinces. The agreement is the Trade, Investment and Labour Mobility Agreement, more commonly called TILMA. There are a host of “operating principles” within TILMA. Of particular interest to the brokerage community are the following:

• establish a comprehensive agreement on trade, investment and labour mobility that applies to all sectors of the economy;

• eliminate barriers that restrict or impair trade, investment and labour mobility;

• enhance competitiveness, economic growth and stability in Alberta and B. C.; and

• increase opportunities and choice for workers, investors, consumers and businesses.

Under TILMA, B. C. and Alberta want to open their borders for trade, investments and labour. Here in Alberta, TILMA is an important and over-arching policy initiative of Premier Ed Stelmach, reflected in the fact that TILMA was introduced in the last session of the legislature as Bill 1.The Insurance Brokers Association of Alberta (IBAA) has attended several functions at which Premier Stelmach has talked about the importance of TILMA for the advancement of the economies for both provinces. He has said TILMA will ensure equal access across borders.

Through TILMA, the Alberta government will try to achieve harmonization with B. C. rather than to protect narrower domestic interests. As a business community, it is easy to believe in and support the basic principles of free trade. However, the IBAA has gone on record saying we cannot support “free trade” when it comes at the direct expense of a business sector in one province, or when an existing competitive level playing field is skewed in favour of one player. We believe this will happen under TILMA.

Currently brokers enjoy a reasonable degree of mobility between the provinces. Each province recognizes the other’s licensing standards and agrees to allow those standards to apply for extra-provincial licensing of brokers (or “agents,” as we are called in Alberta).Therefore, from a licensing perspective, all looks reasonably good in terms of labour mobility, suggesting that both provinces are in sync with TILMA.

But in reality, such is not the case for Alberta insurance brokerages. Insurance brokerages from B. C. can come into Alberta facing no barriers to business: they can be licensed, obtain insurer contracts and open their doors for business. For Alberta brokerages going to B. C., it is a different story.

In both B. C. and Alberta, the largest portion of a typical brokerage’s business is auto insurance. In B. C., the government has a monopoly on auto insurance through the Insurance Corporation for British Columbia (ICBC). ICBC controls the number and location of distribution (or “Autoplan”) outlets. Without Autoplan, an insurance brokerage cannot sell primary auto insurance. There has been and continues to be a moratorium on issuing Autoplan contracts, although they are available for purchase from existing contract holders. One of our members recently investigated purchasing a brokerage in Vancouver and found the cost for an Autoplan contract exceeded Cdn$750,000 — a significant barrier to entry for an Alberta insurance brokerage into the B. C. market!

Another concern with TILMA is that both Alberta-and B. C.-based credit unions will be able to market insurance products in Alberta. In B. C., credit unions now own and operate insurance brokerages. In Alberta, credit unions are currently prohibited from owning and operating insurance brokerages. B. C. credit unions are actively seeking to move into Alberta; even now, they are approaching Alberta brokerages, offering to purchase them, as they feel TILMA will open the doors for entry into Alberta.

If B. C. credit unions can come into Alberta and can own and operate insurance brokerages, Alberta-based credit unions will want the same business powers. In fact, recently Alberta credit unions met with MLAs requesting to have the prohibition lifted on the basis that their “financial margins continue to shrink.”

We find this to be amazing. Credit unions continue to do well; in fact, they are growing. Their own data indicate their asset base has grown from Cdn$9 billion to more than Cdn$14 billion in five years. They are financially strong and have prospered within a consumer-friendly and responsible legislative framework.

The same cannot be said for brokerages in Alberta. On average, our members lost 8% in earnings and faced greatly increased expenses in the first year auto reform was introduced in Alberta. They have seen the cost of doing business continually rise over the past five years.

We wonder if constitutionally the government of Alberta can allow Albertabased credit unions to operate beyond Alberta’s borders or allow out-of-province credit unions to come into Alberta and operate under the Alberta Credit Union Act. It is an interesting question, and one that will have to be answered if TILMA opens the borders for credit unions.

In order to have equal access across borders, the Alberta and B. C. marketplaces need to be much more similar than they are now. There can’t be a level playing field with a government monopoly in one province and private enterprise in the other. In our view, until B. C. has a free market insurance system it becomes impossible to achieve equal access across borders.