Recently, the Alberta government announced that in order to assist Albertans with the skyrocketing cost of living, they are now enacting a limit on auto insurance premium hikes. The limit is capped at the rate of inflation, and is limited to motorists who are deemed to be good drivers.
Although more needs to be learned and clarified, this comes as welcome news to drivers who are struggling with the cost of living these days, and also those who were left out of the government’s rate freeze implemented early this year. Critics have noted that those who had already gone through the renewal process did not have access to the freeze, as well as those who had changes in their driving records and habits and those who moved to a different address.
It also comes as welcome news to the average fault-free Albertan driver, as people in this province continue to pay some of the highest auto insurance rates in the country despite excellent driving records.
The incoming limit on drivers’ rate increases will be tied to the consumer price index, as measured in September of the previous calendar year. That means in 2024, drivers who stick with the same insurance company will not see their premiums rise by more than 3.7%
This raises another sticking point for critics who believe those who choose to change companies should still have access to the same limit.
An additional part of the government announcement allows the Automobile Insurance Rate Board (AIRB) new powers to demand insurance companies return some profits to drivers during “exceptionally profitable years.” Currently there are regulations in place to limit insurance companies’ profits to 6% of total premiums charged in Alberta, however these are only regulations and calculations do not include investment income.
Because auto insurance is mandatory, companies should not be able to profiteer, say critics, and that the AIRB should have firm rules on pulling back excess profits, rather than subjective discretion.
What constitutes a good driver in Alberta?
The announcement included some stipulations for what may be considered a “bad” driver, therefore someone who would not be able to access the cost-of-living limitation for rate hikes.
Those who are not protected 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.
Insurance companies consider several factors when determining what makes a good driver. Premiums are based on risk assessment, and identifying good drivers is crucial in this process. Generally speaking, factors they consider include:
- A clean driving record with no at-fault accident or moving violations is a strong indicator of a good driver. Remember that demerit points usually take two years to clear from a driving record.
- Years of driving experience plays a factor, as more experienced drivers tend to be safer on the road. This is why younger Albertans face much higher insurance premiums.
- The type of vehicle you drive plays a major role in the amount of auto insurance you pay. Safer, more reliable vehicles with advanced safety features (and that are not a target for thieves) lead to lower premiums.
- Drivers who have not filed any claims, regardless of whether or not it was their fault, also are regarded as lower-risk.
- Where you live matters. Downtown and urban areas may see higher premiums due to increased traffic and a greater likelihood of accidents, theft, and vandalism.
- How much you drive also matters. Drivers who use their vehicles for commuting or long distances might have higher rates simply because they are on the road more frequently.
- Unfortunately, your credit score can play a part in your auto insurance premiums. Insurance companies may consider a driver’s credit history when setting rates. A good credit score translates into financial responsibility, which can be reflected in lower auto insurance premiums.
- We are big proponents of driver education programs here at Lane’s. Completing defensive driving courses or other driver education programs can lead to discounts on insurance premiums, plus you are a better driver.
Consider usage-based auto insurance
Usage-based auto insurance was not specifically mentioned in the government announcement, but it is a good option for anyone looking to lower their auto insurance premiums. Otherwise known as UBI, usage-based auto insurance relies on telematics technology. A device placed in your vehicle’s engine sends driving information back to an application in your phone and to your insurance company, and tracks details such as hard braking, hard cornering, and rapid acceleration. If you perform well as a driver, the app will let you know. If you don’t, it will also let you know. Drivers enrolled in a usage-based insurance program can earn a one-time discount of up to 10% for initially enrolling, and demonstrating good driving habits after a certain amount of time can earn you a discount of up to 25% your total car insurance costs. Both Aviva and Intact, companies we at Lane’s have long-standing relationships with, provide UBI options for those who are interested.
Discuss your car insurance coverage with the experts at Lane’s
If you are looking to lower your auto insurance premiums, give the experienced insurance brokers at Lane’s a call at our Calgary, Banff, Edmonton and greater Alberta offices. We are locally owned and operated and work to provide our fellow Albertans the best options available. It is our mandate to help drivers find the excellent coverage at the best rates available to you, 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.