Alberta UCP announces auto rate freeze

Alberta’s United Conservative Party announced today an auto insurance rate freeze until the end of 2023, and insurer and broker associations alike are calling this decision “disappointing” and “not the best option” for consumers.

The government is also requiring insurance companies to provide “most Albertans” with the ability to pay their premiums through payment plans.

“We share Albertans’ concerns about the rising cost of living during the current inflation crisis,” UCP Finance Minister Travis Toews said in an announcement. “We will continue to meet with members of the insurance industry to find additional longer-term solutions for automobile insurance.”

Brokers said a rate freeze will cause strain on “an already fragile segment of insurance,” especially when coupled with inflation and rising vehicle repair costs.

“There will be underlying consequences that the average consumer may not be aware of and they will need to be prepared for them,” said the Insurance Brokers Association of Alberta in a statement.

“Consumers are unlikely to see any direct financial relief as a result of a rate freeze, and will instead face challenges of fewer payment plan options, and fewer options to choose an insurer due to a lack of accessibility,” the IBAA continued. “Much like during Alberta’s last provincial rate caps from 2017 to 2019, consumers will face limited options in the marketplace.”

The Insurance Bureau of Canada has also expressed that, along with consumer consequences, a rate freeze will cause some insurers to struggle to remain viable.

“Rate caps have resulted in significant negative consequences for consumers when undertaken previously in Alberta and elsewhere,” IBC wrote in a release. “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. Premiums still increased 12% when the rate cap was in place.”

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Rate caps also may have long term consequences, the industry observed.

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“If insurers are not able to collect enough premium to pay claims, we will be facing an unstable market environment if this carries on long term,” IBAA added. “The insurers that support Alberta will be forced to take drastic action in order to sustain the current system and continue to support consumers.”

The government said that despite the freeze, Alberta drivers may still see rate increases on their 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, the government said in a release.

This news has led NDP critics to call it a “fake freeze.

“By their own admission, Albertans could still see their rates increase this year,” NDP Finance Critic Shannon Phillips said in a statement.

The UCP’s rate freeze comes three years after their government lifted a cap on rate increases originally imposed by the NDP when the party was in office between 2017-2019—and just weeks after the NDP announced its own intention to freeze rates if elected in the spring.

UCP’s Minister Toews had previously resisted calls to reinstitute the cap, calling it an ineffective stopgap solution, Canadian Press reports.

The industry has indicated its interest in finding a better solution than rate caps for affordable auto insurance.

“IBC and its members have proposed options that would result in an average of $325 in premium savings for drivers,” IBC said in its release.

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Plus, a better solution to reduce auto insurance costs would be through reforms — and by addressing rising costs within the system, Aaron Sutherland, IBC’s vice president, western & pacific told Canadian Underwriter earlier this month.

“We have proposed options to government that would leave money in the hands of Albertans without the consequences of a rate freeze,” IBAA President Barry Haggis said in a statement. “The IBAA will be working with Alberta brokers to assist them in educating and guiding consumers through the negative effects this freeze will have.”

Both associations said they will be working with the government and other key stakeholders like Alberta auto insurers to develop a long-term solution to the rising costs of Alberta auto insurance.

Feature image by iStock.com/Armastas