Albertans who do not qualify as “good drivers” in the future according to the definition used in the province’s rate cap, will likely see their insurance premiums increase by an average of 148.2 per cent between 2023 and 2033, according to a new report commissioned by the Insurance Bureau of Canada (IBC).
What is striking about the report is the highlighted fact that many drivers will eventually fall outside of that definition for reasons unrelated to their driving record. The report also notes that the good driver rating will also stifle competition, as clients will be locked into their existing contracts if they want to maintain the protection that a good driver rating affords.
The report, Impacts of Rate Caps on Auto Insurance Rates in Alberta, says currently three quarters of Alberta’s drivers are considered good drivers under the definition used for the rate cap. It notes, however, that moving, adding a spouse or child to the policy, buying a new vehicle or changing insurers are all reasons that a client would no longer have the rate increase protections afforded to good drivers in the province. (In 2023 a rate pause was introduced, followed by a rate cap of 3.7 per cent starting in January 2024 for those who meet the definition of a good driver in the province. In the meantime, growing vehicle complexity, increased legal representation by those injured in collisions, extraordinary events including the Jasper Wildfire Complex and the Calgary hailstorm and finally increases in the provincial government’s health levy have all driven up claims costs.)
Claims cost pressures
The report by MNP says overall, if the rate cap remains in place and no changes are made to the system, claims cost pressures could increase driver premiums by 87.6 per cent between 2023 and 2033. The increases, they say, will be largely borne by new drivers, those new to the province and potentially by those who are left without insurance should their insurers decide that Alberta is no longer a tenable place to do business.
“The situation is only going to get worse unless the rate cap is removed and the government brings forward reforms to address the underlying cost pressures impacting coverage,” the IBC states. “Only meaningful action to address the cost pressures underlying auto insurance will improve affordability for drivers,” adds Aaron Sutherland, vice president, Pacific and Western, with the IBC. “The rate cap has made the affordability of auto insurance worse, not better for Alberta drivers. It must be removed immediately before it causes any further damage.”
Related:
Volume of insurance claims threaten auto insurance availability in Alberta
Alberta rate filing pause fails to reduce insurance premiums
