Auto insurance premiums in Alberta increased by 5.24% in 2023, despite a government pause on rate filings, according to new data from the General Insurance Statistical Agency (GISA), a statistical agency created and overseen by provincial insurance regulators.
“We’ve seen this time and time again: Rate caps simply don’t work. They don’t improve affordability for drivers and only serve to push problems down the road,” said Aaron Sutherland, Vice-President, Pacific and Western, Insurance Bureau of Canada (IBC). “Urgent action is needed to address the cost pressures underlying premiums to improve affordability for drivers, and it’s imperative that this work begin now.”
The provincial government enacted a rate pause in January 2023, restricting insurers from filing for any new rate increases. However, auto insurance rates continued to rise throughout the year for various reasons, including:
The implementation of rates which were approved by the government’s Automobile Insurance Rate Board prior to the rate pause;
The rate cap forced some insurers to leave the market or restrict the coverages they provide in order to remain viable. Their customers were forced to find new, often more expensive, coverage elsewhere; and,
New drivers, as well as those who moved, changed vehicles, or added a spouse or dependent to their policy may have seen rate increases last year, which contributed to the overall increase in rates.
“Rate interventions create inherent unfairness for drivers,” added Sutherland. “Under normal circumstances, drivers with a history of safe driving are usually rewarded with lower rates. However, when rates are paused or capped, the mounting cost pressures in the system have to be spread across all drivers. This forces everyone to pay more, regardless of their driving history.”
In November 2023, the Alberta government announced it was ending its rate pause and replacing it with a “good driver” rate cap as a short-term solution. Since that time, Alberta’s auto insurance system has faced some of the highest cost pressures in Canada. Legal costs now account for a greater portion auto insurance premiums in Alberta than anywhere else in Canada, and the province ranks second in Canada for the amount spent to repair vehicles as well as for the frequency at which vehicles are stolen.
IBC has proposed changes to the auto insurance system that would give drivers more control over their coverage options. This includes 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. When combined with regulatory and tax changes, these reforms could save drivers up to $325 on average per year.
“As the government’s public engagement on the future of auto insurance comes to a close in the coming weeks, it’s imperative that work to develop reforms begins immediately,” said Sutherland. “Changes will take considerable time to develop, and auto insurers will then need 24 months to implement these changes so that they are reflected in consumer premiums. The province must act quickly and decisively to see improved affordability for drivers before the next election.”
Additional Resources
Albertans believe government should take urgent action to lower auto insurance rates
Auto insurance reports confirm legal costs are key driver of auto insurance premiums in Alberta
Good drivers in Alberta pay millions more in premiums to subsidize auto insurance for worst drivers
Alberta auto insurance system cost pressures among highest in Canada
Insurance Bureau of Canada reveals the top 5 hot spots in Alberta for auto theft claims
