“Self-defeating” price controls are doing more harm than good; only way to improve affordability is to address cost pressures associated with auto insurance claims
A new report from noted public policy expert Jack Mintz has found that the Alberta government’s price controls on auto insurance – such as the current rate cap and Alberta’s Grid system – are hurting drivers in the province, while doing little to improve affordability for Albertans.
“Freezing insurance premiums, even temporarily, is ill-advised since it will lead to higher premium hikes in the future,” writes Mintz in the report entitled Alberta’s Vehicle Insurance Options. “The Grid used by Alberta includes various price caps to protect certain drivers from higher insurance premiums, but this comes at the expense of other drivers who have to bear higher premiums such as good drivers. Both the rate cap and Grid should be abolished immediately.”
In 2023, the Alberta government froze auto insurance rate filings. It followed that policy in 2024 with a 3.7% rate cap for “good drivers.” Similarly, the provincial Grid framework caps rates for high-risk drivers, forcing safe drivers to pay higher premiums to subsidize rates for those whose premiums are capped by the Grid.
Alberta’s auto insurance system is facing significant costs, all of which are growing well in excess of the government’s 3.7% rate cap and must be addressed to improve affordability for drivers. Over the past two years:
Legal costs have grown a projected 19%
The cost of delivering care and recovery benefits to those injured in a collision is up about 27%
The cost of new and used replacement vehicles has grown 27% and 9%, respectively
The cost of auto theft is up 55%
The Alberta government’s health levy on auto insurers is up a staggering 60%.
In his report, Mintz, who serves as President’s Fellow of the School of Public Policy at the University of Calgary, noted many of these same cost pressures building up in the auto insurance system and encouraged the government to consider reforms that promote economic efficiency, fairness and financial stability – principles the rate cap and Grid are working against.
“Jack Mintz is a well-respected voice on public policy and adds to a growing chorus of experts warning of the consumer and economic harms of the province’s rate cap,” said Aaron Sutherland, Vice-President, Insurance Bureau of Canada. “Nearly a decade of government intervention in the Alberta insurance market has compounded the underlying cost pressures that are driving up premiums. Only meaningful, reform to address growing cost pressures will pave the road to a better outcome for consumers.”
Mintz also stressed that auto insurance customers are best served by open, competitive markets that provide a net economic gain, improved prices and greater quality of service.
