Alberta brokers, IBC urging government to remove rate cap, citing high premiums leaving drivers uninsured

The Insurance Brokers Association of Alberta (IBAA) and the Insurance Bureau of Canada (IBC) are sounding the alarm as more drivers find it difficult to get affordable auto insurance coverage, citing the government-imposed rate cap.The rate cap — now in its third year — states that insurance premiums will increase by 7.5% each year when the policy is up for renewal, before they go back to the 2024 levels at the beginning of 2027, when the Care-First Auto Insurance model takes effect, explains Tyler van Vliet, associate lawyer at Crash Lawyers.“Because of the rate cap, insurers are reducing what they offer or pulling out of Alberta altogether. That makes our job incredibly difficult, and drivers are suffering as a result. The cap was meant to help good drivers, but it’s doing the opposite. It needs to be removed now so the market can recover,” Jhnel Weller-Hannaway, CEO of IBAA, said.Insurance companies are scaling back coverage options or leaving Alberta entirely as a result of the rate cap, according to the IBAA, leaving many drivers underinsured and paying out-of-pocket after accidents.According to the IBAA, drivers with past claims are facing fewer insurance options. Those leasing vehicles cannot get the full collision and comprehensive coverage their lease contracts require. Meanwhile, some drivers are now forced to find new insurance providers after their insurance companies left Alberta..Advocates say a no-fault insurance model in Alberta could take away victims’ rights, put a strain on the healthcare system.The IBAA warns that fewer insurance options could push premiums even higher, as insurers try to make up for their losses, noting that Alberta drivers are already paying the second-highest auto insurance premiums in Canada.“We urge the government to lift the rate cap so that competition and choice return to the market. Reforms should focus on improving care, while also making premiums more affordable and coverage more accessible—for everyone, not just those in accidents,” Weller-Hannaway said.According to the IBC, the root cause stems from rising financial losses insurers have faced over the past three years, due to government-imposed caps on auto insurance premiums. It adds driver premiums are under intense pressure as a result of inflation, legal expenses, and other economic factors, noting that all of which are increasing faster than the cap allows insurance providers to keep up.The Alberta Auto Insurance Rate Board (AAIRB) — which regulates premiums in the province — reported that insurers lost 20 cents for every dollar in premiums collected in 2024, due to the ongoing cap on rate increases, in its most recent annual report.According to a lawyer from James H. Brown & Associates LLP, Karamveer S. Lalh, the hailstorms in Calgary and the wildfires in Jasper in 2024 are to blame for some of the losses insurance companies have incurred in the last year..Canada's inflation rate rose to 1.9% in June as prices of cars, clothes rise.“When an insurance company prices a product, what they want to do is they want to look at how much they expect to pay out, and they then take that expected loss cost, and they try to spread it out over all of the policyholders that they have. So, for example, usually we find that the collision rate tends to be a certain amount every year... when there's a first snowfall, there tends to be more accidents. Certain areas of the province tend to have more accidents. So, those are relatively predictable year to year,” he said.Driving behaviour has changed after the pandemic as more people started to work from home and drive less, he said.“People don't drive as much. But on the other hand, when you have natural disasters, such as hailstorms or major fires that destroy a lot of property all at once, those costs become less predictable and they're harder to price," he said."So, because of the Calgary hailstorm and the Jasper wildfire, we found that the loss cost for comprehensive, specified perils and all perils coverage went up significantly in the last five years. And whereas, like our interpretation of the data would be that things like collision and third-party liability, which is more losses associated with two cars getting into an accident, we would interpret that data as remaining relatively stable.According to Lalh, the Alberta government should probably consider changing the amount that insurance companies are allowed to charge extra due to natural disasters to keep prices in check..Housing starts continue to grow with Alberta, the Prairies leading Canada: CMHC report.On the other hand, he agrees with the IBC and the IBAA’s stance when it comes to asking the government to ease regulations, especially the rate cap.The rate cap prevents insurance companies from setting their price according to what the market demands, according to Lalh.The Alberta government introduced a no-fault auto insurance system – the Care-First Auto Insurance model – effective at the beginning of 2027. It is meant to reform the current system, but advocates say it could take away victims’ rights, leaving them in vulnerable positions and putting an extra strain on the healthcare system.The new system will provide unlimited treatment coverage for victims for life, but bar victims of accidents from suing for damages, such as pain and suffering, according to van Vliet.The Western Standard has reached out to the Ministry of Treasury Board and Finance for comment..Alberta land development company fined $350K in workplace death

Alberta brokers, IBC urging government to remove rate cap, citing high premiums leaving drivers uninsured

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