‘Price controls create shortages’: Albertans feeling the pinch as some insurers pull out, rates increase

Alberta drivers are struggling with high auto insurance premiums, as the rate cap has driven some insurers out of the market and made others reluctant to offer coverage — leaving remaining providers overwhelmed and many people scrambling to find affordable options.“It’s not surprising that when you introduce price controls you create shortages. So, that's what's happening,” an economics professor, Moshe Lander, told the Western Standard Monday in an interview.“In creating that shortage, it creates the ability to charge well above the market rate to those that managed to get the insurance.”According to Lander, caps need to be removed to let the market function. Lander says any attempt to limit or block the market has negative consequences. He compares caps with Trump’s tariffs.“They're both attempts to distort the market from working,” Lander said.He also suggests addressing unfairness in auto insurance through the tax system..Alberta brokers, IBC urging government to remove rate cap, citing high premiums leaving drivers uninsured.“If the government felt that there was some sort of unfairness, they can always address that through the tax system. So, they could always say, for example, that if people are paying a premium that's greater than a certain proportion of their income, then you give them a tax credit or you give them some sort of adjustment to compensate them for that. It's no different than, say, a GST rebate check for lower income,” Lander said.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 the Insurance Bureau of Canada (IBC), 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. It notes that 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.But a lawyer from James H. Brown & Associates LLP, Karamveer S. Lalh, says drivers are not to blame, citing increased claims due to natural disasters in 2024, such as hailstorms in Calgary and the wildfires in Jasper.The Western Standard asked Lander about insurance companies’ role in the market and whether they’re acting in good faith..Advocates say a no-fault insurance model in Alberta could take away victims’ rights, put a strain on the healthcare system.“So, profit is the greatest signal that a market can have. People feel that companies can be greedy or that they can make excessive profits, but the great thing with profits is that if all of these insurance companies are making profits, the signal that it sends to other potential companies is if you come into this industry, and you replicate what we're doing, you too can be profitable,” Lander said.The signal that is being sent right now is that the market is not profitable. This makes insurers pull out, creating shortages, and therefore increases prices.“So, where is the incentive then for a potential entrant to come into the market if they say if I come in, you're just gonna regulate me anyway.”Meanwhile, the Insurance Brokers Association of Alberta (IBAA) and IBC have also sounded the alarm as more drivers find it difficult to get affordable auto insurance coverage, citing the government-imposed rate cap.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..Alberta Next panel’s tax collection plan: Here's what you need to know.Sonnet Insurance – a subsidiary of Definity Financial Corp. – and S&Y Insurance Company — an Aviva Canada subsidiary — and the Aviva Direct brand have exited the market.Meanwhile, Intact Financial Corp. has publicly stated it is reducing its service in Alberta, though it hasn’t exited the market.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.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."Alberta’s government continues to review elements of the Alberta insurance industry as part of the Care-First automobile insurance reform project. Decisions and timing related to the rate cap and other elements are being reviewed as part of the rollout of the Care First system in 2027. The new system will eliminate much of the legal fees in the system, which represent the largest component of insurance costs," said the Ministry of Treasury Board and Finance’s office in an email. "Only two insurers, representing less than 5 per cent of total policies, have moved out of province. We are working with the industry to ensure Albertans continue to have choice for their insurer.".What happens if Alberta stops making the equalization payments?

‘Price controls create shortages’: Albertans feeling the pinch as some insurers pull out, rates increase

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