The Insurance Bureau of Canada (IBC) is drawing attention to a new report it commissioned Deloitte LLP to create, entitled Alberta Grid rating: Demographic composition and subsidization, which shows Alberta’s worst drivers receiving annual auto insurance subsidies worth thousands every year – up to $10,000 each.
Unique in Canada
“Alberta’s grid rating system is unique in Canada in that it caps the premiums of high-risk drivers. This means no matter how many at-fault collisions or infractions they have, high-risk drivers will never pay more than a set maximum amount. Because these drivers pay less than required for auto insurance, drivers with safe driving habits pay higher premiums to make up the difference,” the IBC writes. “Established in (October) 2004, the grid was originally intended to ensure that new drivers could access an affordable premium. However, the number of drivers protected by the grid cap has grown dramatically and today, the majority are not new drivers.”
Among the study’s key findings, Deloitte states that safe drivers pay $180-million annually, about $65 per driver, to subsidize the premiums of high-risk drivers. “Fifty-two per cent of drivers subsidized by the grid have more than seven years of driving experience and are not the new drivers that the system was intended to support,” they add. “On average, high-risk drivers in Alberta with a history of at-fault claims and infractions receive an annual subsidy of $2,516. On average, Alberta’s worst drivers with an extensive history of claims and infractions receive an annual subsidy of $9,859.”
IBC recommends the grid be removed
Aaron Sutherland, vice president with IBC says there is no public policy rationale for subsidizing the premiums of high-risk drivers with a history of at-fault claims and infractions. “It is clear that the grid no longer meets its original purpose and puts a significant strain on the affordability of auto insurance for good drivers,” the IBC continues in a statement about the publication’s release. “Given the province’s focus on improving affordability, IBC recommends the grid be removed – or substantially reformed – to strike a better balance for the majority of Albertans who drive safely.”
The report analyses historical data from 2016 to 2021, provided by seven medium and large insurers that provide approximately 80 per cent of the private passenger vehicle auto insurance in Alberta.
Distorts price signal
“Safe and experienced drivers in Alberta are paying significantly more in premiums than is actuarially justified,” the report states. “This distorts the price signal that insurance companies can provide to incentivize safe driving behaviour and works in direct opposition to other mechanisms – such as driving convictions and infractions penalties – intended to improve driving habits on provincial roadways.”
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