On Jan. 26, 2023, a news release from the Alberta government announced they would be freezing all rate hikes until the end of the year. A statement from the then-Minister of Finance Travis Toews said, “We share Albertans’ concerns about the rising cost of living during the current inflation crisis. We will continue to meet with members of the insurance industry to find additional longer-term solutions for automobile insurance.”
Did it work?
New data from the General Insurance Statistical Agency, a body overseen by provincial insurance regulators, shows that it did not. In fact, auto insurance premiums in Alberta rose by 5.24% last year.
The Insurance Bureau of Canada (IBC), which has often said that rate caps do not help reduce rates, lists several reasons for continued increases in auto insurance costs in Alberta.
- Several rate increases had already been approved by the government’s Automobile Insurance Rate Board before the rate pause was implemented.
- The rate cap led some insurers to exit the market or limit their coverage offerings.
- New drivers, along with those who moved, changed vehicles, or added a spouse or dependent to their policy, saw rate increases, contributing to the overall rise in rates.
“Rate interventions create inherent unfairness for drivers,” said Aaron Sutherland, IBC vice-president, Pacific and Western. “Typically, drivers with a history of safe driving are rewarded with lower rates. However, when rates are paused or capped, the mounting cost pressures in the system are spread across all drivers, forcing everyone to pay more, regardless of their driving history.”
The Government of Alberta has tried a number of different approaches to try to lower rates for Albertans, but nothing appears to be working for the long run. As tensions between the industry and government continue, two insurance providers have left the province, which has caused government members in charge of transportation to recently hint that a public auto insurance option is not off the table.
The “good driver” solution
In November 2023, the Alberta government announced the end of its rate pause, replacing it with a “good driver” rate cap as a short-term solution. Since then, says the IBC, Alberta’s auto insurance system has faced some of the highest cost pressures in Canada. Legal costs now account for a larger portion of auto insurance premiums in Alberta than anywhere else in Canada. The province also ranks second in Canada for both the amount spent on vehicle repairs and the frequency of vehicle thefts.
The IBC has proposed changes to the auto insurance system to give drivers more control over their coverage options. These changes include the ability to waive a cash settlement for pain and suffering following a minor injury while doubling the amount of pre-approved treatment and care for those injured in a collision. Combined with regulatory and tax changes, these reforms could save drivers up to $325 on average per year, they say.
Alberta government challenging the insurance industry
Albertans have been clear in that they want lower auto insurance premiums. The Alberta government is considering a no-fault private insurance system that could reduce rates significantly.
Nate Horner, Alberta’s Minister of Finance and President of Treasury Board, said in a recent Calgary Herald article that he believes “no-fault” is a misleading term; “no-sue” is more accurate.
Litigation is essentially removed from the claims process with no-fault auto insurance, which proponents say helps keep the cost of insurance down. Companies are freed from fighting years-long court battles, assisting with overall savings for the company, which are then passed on to the consumer.
A recent independent review found that a no-fault or no-sue system, delivered by private companies, could lower average premiums by about $400 a year.
Several provinces have already implemented aspects of no-fault (no-sue) auto insurance into their insurance systems. You can’t sue for pain, suffering, or financial losses in Manitoba, which allows for pre-determined payouts to be quickly allotted to the non-responsible parties, and nobody can go to the courts for further damages. Quebec operates in a similar manner as Manitoba, and Ontario uses a fully no-fault system.
In Saskatchewan, auto insurance plans default to no-fault personal injury coverage, but drivers can opt out for an at-fault policy.
Government cautions action may be taken
Horner says he is hesitant to go down the path of public insurance and that companies must start to work with the government and the rate board.
“If this is the route we take and they can’t deliver, they’ll know we have other options that don’t involve them. They must deliver. If they can’t, the delivery model will be next,” Horner says.
“They know we’re focused on affordability. Albertans are paying too much.”
If the province adopts a system similar to public auto insurance in Saskatchewan but run by companies here, people could choose between a policy allowing lawsuits or not, with court cases being rare. The “no-sue premium” would be cheaper.
Horner also says that if the province opts for no-fault (no-sue), the benefits schedule for injured drivers must be clear, focused on quick care, and appropriate for both those who can recover and those who can’t fully recover.
The best way to get lower rates now is to work with a broker
In addition to the deals we get from insurance companies for selling their products to the right consumer, insurance brokers also have access to a number of different types of discounts to help find you lower rates. And we will never fail to ask if you qualify for each of them. Insurance companies have the bad habit of concealing potential savings from their clients, whereas our mandate is to reveal absolutely everything. Several companies provide alumni discounts, discounts for certain types of professions, reductions for bundling your policies, and so on. We know the right questions to ask to ensure you get the best deal available.
Lane’s Insurance is a leading Alberta-based brokerage working out of Calgary, Banff, Edmonton and greater Alberta. In addition to extensive customer resources, outstanding claims support and value-added service, Lane’s Insurance helps you save by getting insurers to bid on your business. The result is fantastic coverage at lower auto insurance rates.
