The Insurance Bureau of Canada (IBC) was established 1964 and is the national industry association representing Canada’s private home, auto, and business insurers. They act as Canada’s insurance watchdog and work with governments, regulators, and stakeholders to keep the private property and casualty insurance sector competitive, healthy, and viable. The aim is to ensure that Canadians are safeguarded from both current and future risks and have access to affordable and comprehensive coverage across the board.
The IBC recently published an article that is likely quite irritating to Alberta’s accident-and-demerit-free drivers. It turns out that the province’s grid rating system – the only one of its kind in Canada – is resulting in claims-free drivers subsidizing the auto insurance costs of high-risk drivers.
What is Alberta’s grid rating system?
Alberta’s grid rating system was put in place two decades ago and was meant to allow new drivers the ability to access affordable auto insurance premiums. It sets a maximum cap on premiums for high-risk drivers regardless of their number of at-fault collisions or infractions. These reckless drivers never pay more than a predetermined maximum amount, which means that some of the very worst offenders are receiving substantial annual auto insurance subsidies, reaching as high as $10,000.
Consequently, drivers with safe driving records end up paying higher premiums to offset the shortfall.
Although the grid rating system was meant to benefit new drivers who were being targeted with astronomical auto insurance rates, a report by Deloitte LLP has shown that the majority of beneficiaries are no longer new drivers. With this, it seems clear that Alberta’s auto insurance grid rating system no longer meets its original objectives.
Other key findings from the report are:
- Safe drivers in Alberta collectively contribute $180 million annually to subsidize the premiums of high-risk drivers. That is the equivalent of about $65 per driver.
- 52% of the drivers benefitting from grid subsidies have more than seven years of driving experience.
- High-risk drivers in Alberta, on average, receive an annual subsidy of $2,516 due to their history of at-fault claims and infractions.
- The worst drivers in Alberta, those with extensive claims and infractions, receive an average annual subsidy of $9,859.
Aaron Sutherland, vice-president, Pacific and Western for the IBC, states:
“Each day, the grid system penalizes safe drivers in Alberta with higher premiums. Insurance is meant to incentivize safe driving habits and is crucial for public safety. Subsidizing the premiums of high-risk drivers with a history of at-fault claims and infractions lacks any public-policy rationale. It is unfair and undermines the promotion of safe driving, which the government should encourage.”
The IBC suggests either abolishing or substantially reforming the grid to better serve the vast majority of Albertans who drive responsibly.
Safe drivers received small break in 2023
In November 2023, the Government of Alberta announced limits on auto insurance hikes for good drivers.
The limit is capped at the rate of inflation, and should be provided to motorists who are deemed to be “good” drivers. Automobile owners who have had several years of going claims-free and not incurring any demerits on their license, and who stick with the same insurance company, will not see their premiums rise by more than 3.7%.
Those who are not protected from a rate hike include:
- Drivers who have had one or more at-fault crashes in the last six years.
- Drivers who have had a criminal code traffic conviction during the last four years, such as impaired driving.
- Drivers who have had a major traffic conviction during the last three years, including distracted driving or speeding in a school zone.
- Drivers who have had a minor traffic conviction in the last three years, such as failure to stop or following too close.
Although these changes were good news to those who practise defensive driving and who are claims-free, the core problem still remains. As mentioned, safe drivers in Alberta collectively contribute $180 million annually to subsidize the premiums of high-risk drivers. Those funds still need to come from somewhere. The rate freeze of 2023 came to an end at the beginning of 2024, but, again, the grid system puts a maximum cap on high-risk drivers who were meant to be just new drivers.
Discuss your auto insurance coverage with the experts at Lane’s
Although there are difficulties with Alberta’s auto insurance system, drivers do have options if they just look around a bit.
Drivers may be able to access lower auto insurance premiums by giving the experienced insurance brokers at Lane’s a call. We are locally owned and operated and work to provide our fellow Albertans the best options available. We work for you, not the insurance companies, and it is our mandate to help drivers find the excellent coverage at the most affordable rates available to you according to your driving and insurance, and to provide customer-oriented, matter-of-fact service. To learn more, or to obtain a quote, please contact us at our Calgary, Edmonton, Banff and Alberta offices.
