Alberta strikes panel to review auto insurance, won’t bring back rate cap

Alberta is reviewing auto insurance in the province to ensure that the industry can remain viable and drivers can get affordable coverage.

Finance Minister Travis Toews says Albertans are paying some of the highest rates in Canada but are having trouble getting critical protection such as comprehensive and collision coverage.

But a five per cent annual cap on rate increases, introduced by the former NDP government and abandoned by his United Conservatives, is not coming back, he says.

“The rate cap simply put a Band-Aid on a wound that was festering,” Toews said at the legislature Wednesday.

Tweet This Click to share quote on Twitter: "The rate cap simply put a Band-Aid on a wound that was festering," Toews said at the legislature Wednesday.

“In the intermediate and long term it was no solution, and even in the short term it made a bad situation worse.”

READ MORE: 6 ways to cut your auto insurance rate in Alberta

Auto insurance rates in Alberta have been rising sharply in the last five years. It trend prompted the NDP government to cap global rate increases at five per cent annually for each insurer starting in 2017.

3:04 Albertans brace for double-digit auto insurance rate hikes

The new UCP government did not renew the cap in August, and some drivers have since reported getting notices of steep rises in rates of 12 per cent or more.

Insurers have said that under the cap they were losing money in Alberta, given more payouts for car theft, injury claims, repairs and catastrophes such as the 2016 Fort McMurray wildfire.

Toews said the cap forced insurers to seek savings at the expense of drivers by, in some cases, refusing to offer critical protections.

In other cases, individual clients were still hit with steep increases as long as the overall hike by the insurer to all Alberta clients remained at five per cent.

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“Under the cap, we had insurers getting squeezed … so Albertans were finding themselves with fewer and fewer insurance options,” said Toews.

“We ultimately need to deal with the challenges that are leading to increased premiums … and present a reformed insurance system in this province that can serve Albertans well.”

Tweet This Click to share quote on Twitter: "We ultimately need to deal with the challenges that are leading to increased premiums … and present a reformed insurance system in this province that can serve Albertans well."

READ MORE: Distracted driving could mean higher insurance rates for motorists

A three-member committee headed by Chris Daniels has been asked to research and recommend solutions that work for all parties within the existing privately delivered system.

The committee is to report back in the spring. Toews said the government will take action as soon as possible after that.

LISTEN: Finance Minister Travis Toews joins Rob Breakenridge to discuss the advisory panel tasked with assessing Alberta’s auto insurance industry

Daniels, consumer representative on the Automobile Insurance Rate Board, said there is no single reason for rising costs, although technology has made what used to be minor damage no longer minor.

“The new cars have a tremendous amount of technology,” said Daniels.

Tweet This Click to share quote on Twitter: "The new cars have a tremendous amount of technology," said Daniels.

“A lot of the sensors of those new technologies are located in the windshield, so you have a windshield replacement that used to cost maybe $300 is now costing $1,500.”

The Insurance Bureau of Canada said it welcomes the review, particularly as it relates to injury claims.

“Increases in payouts for minor injuries have led the average claim size to increase by nearly 10 per cent per year,” bureau vice-president Celyeste Power said in a statement.

“Alberta’s three million drivers have said they want more affordable premiums, more choice, and care they can count on when they need it.”

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The three members of the committee:

1. Consumer and insurance industry expert Chris Daniel, who is in his second term as the consumer representative on the Automobile Insurance Rate Board
2. Legal expert Shelley Miller, a lawyer with specific expertise in auto insurance reform
3. Medical expert Dr. Larry Ohlhauser, who is the chief medical advisor to the superintendent of insurance