There have been numerous reports in the media lately regarding that fact that Alberta auto insurance rates are rising for many drivers. Many insurance companies have applied for – and received – permission from the province’s Automobile Insurance Rate Board to raise rates. This follows the Government of Alberta’s decision to remove the applied cap, which limited the amount rates could be increased to a maximum of 5% per year.
It is not known exactly how many insurance companies have applied for permission to raise their rates, or exactly how much auto insurance rates will rise, but the consensus that can be gleaned from Global News, CBC, and CTV articles are from between 10% and 20%, with a 15% increase to the grid rate level, which denotes a maximum that insurance companies can charge for basic coverage. Not many drivers are rated according to the grid rate level, mainly just those who have not been driving long and who need to prove themselves as reliable operators before they will be moved up the scale.
This is not the best news for drivers, we are aware. But experts are saying that the removal of the rate cap is bringing a welcome end to an unsustainable situation for auto insurance companies.
Why Auto Insurance Rates are Rising
The move made by Alberta’s current government has the approval and backing of the Insurance Board of Canada (IBC), whose member companies represent 90% of the Canadian property and casualty (P&C) insurance market. In an insurancebusinessmag.com article published in September titled “Alberta government to lift auto insurance rate cap,” IBC Western vice-president Celyeste Power said, “We’re hoping to see some of the issues addressed within the system, and we’re also looking to just open up the insurance market a little bit more.” This may make little sense to those facing a rate increase, but Power has good reasons for her claim.
Auto insurance rates are rising because, as Power says in the CBC article, for the last five years insurance companies have been paying out an average of $1.12 in claims, taxes, and operating costs for every $1 brought in. The total underwriting costs have reached approximately $2 billion.
Some may say that there doesn’t seem to be much wrong with that, as insurance companies seem to still be profitable. But as we describe in our article “Auto Insurance Cap Affecting Coverage for Albertans,” there were unintended consequences to the rate cap that ended up inadvertently removing insurance options for drivers. A Calgary Herald article published in April of this year described how the 5% cap “backfired” and ended up discouraging industry from operating in this province. Because insurance companies said they were losing money – up to 30 cents on each dollar brought in – some stopped taking new customers and numerous contracts between auto insurance providers and brokers were cancelled. This ended up with far fewer overall options for those looking for coverage.
It’s true that Alberta auto insurance rates are rising for many drivers, however the result may just be more choice and better coverage for many.
As an insurance brokerage, we at Lane’s rely on our ability to find our clients the best possible coverage at the lowest possible rates. We have, and always will, work for YOU, not the insurance companies. We can do our job much better when we have a large pool from which we can contrast and compare policies in order ensure our clients are getting the best value possible for their hard-earned dollars.
There are More Reasons Why Auto Insurance Rates are Rising
Rising auto insurance rates have more to do with than just profitability. The amazing, often life-protecting technology included in almost every vehicle these days, such as airbags, anti-lock brakes, electronic stability control, help decrease the severity of injuries incurred after an accident, but they are also expensive to fix. Even repairing an older vehicle after an accident can run into thousands of dollars very easily. In addition, despite targeted efforts, plus what can be a very heavy penalty, including the cancellation of insurance policies, distracted driving continues to be a very real problem in Alberta. There were 18,659 distracted driving offences recorded in 2017/2018, which is a scary number considering distracted driving had been proven to be even more dangerous than drunk driving,
Plus, Alberta’s weather is changing, and we have seen a number of major weather incidences that have resulted in tens of thousands of claims being filed. Since only 2014, huge hailstorms have tallied up more than $1.5 billion in insurable damages. The flood of 2013 resulted in about $4 billion worth of insurable damages, with many of those being vehicles that were not evacuated from flood zones.
How Insurance Works
When you buy insurance in Alberta, you’re essentially pooling your money with that of other policy holders. This pool of money is used to pay out legitimate claims. Insurance companies constantly reassess the situations of individual policy holders to see if they are presenting greater or lesser risk, and then calculate the likelihood of a particular policy holder making a claim. The more likely you are to make a claim, the higher your premiums will be.
Insurance brokers such as us at Lane’s will do whatever we can to find you the lowest-cost policy. But the very best thing you can do to combat the fact that auto insurance rates are rising is to remain claims-free. That means being a defensive, conscientious driver at all times, and recognizing that driving is a privilege, not a right.
Trust Lane’s Insurance for Your Auto Insurance Needs
Lane’s Insurance is a leading Alberta-based brokerage, providing extensive resources and highly competitive rates on the essential auto insurance protections you need as a driver. Remember: you can save up to 20% by bundling your home and auto insurance together.