Alberta’s government is pausing rate increases for private vehicle insurance to the end of 2023, according to a news release Thursday.
“Affordability is a primary challenge facing many Albertans as rising inflation makes it challenging for many to afford necessities, including auto insurance,” said Matt Jones, minister of affordability and utilities.
No new rate increases will be approved for the remainder of the year, according to the province; however, some Albertans may see rate increases on renewals this year.
“This may be due to previously approved rate changes, changes to driving records including at-fault claims and tickets, or changes to insurance profiles such as a new address or a different vehicle being insured,” said the province.
While the rate increases are paused, the government will work on longer-term solutions, according to finance minister Travis Toews.
“It just gives us time to work with the industry to ensure we’ve uncovered every possible way to keep rates as competitive and as low as possible,” he said.
The province said it is also hearing concerns that it has been a challenge for Albertans to pay their annual auto insurance premiums in one lump payment upfront. To help with this, the province is requiring insurance companies to let most Albertans pay their premiums through payment plans.
“In addition to pausing rates until the end of 2023, Alberta’s government will continue developing short- and long-term solutions to steady and lower auto insurance rates,” the province said.
One study shows that insurance premiums in Alberta are among the highest in the country.
The report released by Ernst & Young in December showed an 18-year-old male student with a Stage 2 learner’s license and a 2012 Honda Civic LX would pay about $6,140 a year in Calgary and $6,471 a year in Edmonton, compared to $2,311 a year in West Kelowna, B.C., and only $1,128 a year in Saskatoon, Sask.
The price differences are similar across other driving profiles — for a single, employed 35-year-old female with 19 years driving experience and a 2018 Volkswagen Tiguan, she’d pay around $2,700 a year in both Calgary and Edmonton, compared to $1,876 a year in Toronto, Ont., and just over $1,000 a year in Nanaimo, B.C.
Ernst & Young said the report was commissioned by B.C.’s public insurer, ICBC, and that comparing rates across provinces isn’t an “apples to apples” comparison.
Other recommendations from the government for those struggling with auto insurance include shopping around for better rates, working with current brokers for a better deal and bundling home and property insurance.
A personal injury lawyer based in Edmonton who has worked in the sector for 30 years said he has “seen this movie before.”
Mark McCourt said this mirrors a similar situation from 2004, when the Alberta government froze insurance rates at high prices and then passed laws changing how much injured people were compensated.
“I’m worried that the other shoe to drop will be that the insurance lobbyists, on cue, will plead poverty and claim that insurance companies aren’t making very much money,” said McCourt.
“So the insurance lobby… (might) ask the government to severely reduce the compensation that insurance companies have to pay to people hurt by negligent drivers, which is the whole point of having car insurance.”
The Insurance Bureau of Canada is not impressed by this freeze.
“During Alberta’s last provincial rate cap from 2017 to 2019, consumers faced challenges securing the coverage they needed, as insurers were forced to take action to remain viable and continue paying customers’ claims,” said spokesperson Brett Weltman, adding that premiums still increased 12 per cent when the rate cap was in place.
Weltman said IBC members have presented other ways to lower premiums, by an average of $325 per year, to the Alberta government.
Toews said the government has reached out to industry representatives and that they have been cooperative.
“I believe insurers will be patient on rate increases,” said Toews.
“They’re committed to work with us as a government to look for solutions to keep automobile insurance premiums as low as possible.”
The Opposition NDP said the UCP has claimed in the past rate caps don’t work and it has recently blocked NDP legislation that would have put a “real freeze” on insurance rates.
“The UCP lifted the rate cap brought in by our Alberta NDP government and insurance premiums skyrocketed. Auto insurance rates went up as much as 30 per cent during the pandemic — a time when Albertans were driving and working less — and the UCP did nothing,” said finance critic Shannon Phillips.
The NDP installed a rate increase cap when it was in power, limiting auto insurance providers to a maximum five per cent annual rate hike. The UCP let that cap expire months after being elected in 2019, claiming the cap was damaging to both industry and consumers.
“Now Albertans are paying for the most expensive auto insurance in the country in the midst of the worst affordability crisis in 40 years,” Phillips said.
Toews said Thursday’s move is different from a rate cap.
“Rate caps that are implemented without an end date are extremely negative and ultimately result in abhorrent behaviour by insurance providers,” he said.
“We saw this with the NDP rate cap. Insurance providers pulled back products, weren’t offering comprehensive, weren’t offering collision, some weren’t offering rate plans.”
“There is no justifiable explanation for the amount of profits that are being enjoyed by the insurance companies here in Alberta relative to other parts of the country,” said Alberta NDP leader and former premier Rachel Notley.
“There is no good explanation for why Albertans are paying more other than the fact this UCP government is captured by insurance company lobbyists, many of whom have worked on their campaigns.”