Alberta to introduce rate cap for drivers with good records | Insurance Business Canada
Motor & Fleet
Alberta to introduce rate cap for drivers with good records
It’s a “short-term” fix aimed at easing high premiums
Motor & Fleet
Alberta has announced plans to introduce a rate cap to ease the high auto insurance premiums in the province.
Finance minister Nate Horner spoke of the reforms during a Wednesday press conference. He said the government will implement the rate cap, to take effect in January 2024, for drivers with good records.
The rate cap will be tied to the inflation rate, Horner said, restricting the increase of premiums to no more than the 3.7% rate in September.
Good drivers are defined as those who have not been at fault in any accidents for the past six years, have not been convicted of any traffic infractions under the Criminal Code for the past four years, and have had no major traffic convictions or more than one minor traffic conviction in the last three years.
Horner called it a “short-term measure” to keep auto insurance costs down. At the same time, a third party commissioned by the government is completing a report exploring long-term reforms for Alberta’s system.
“This is not sustainable either,” he said. “Nothing in this package really gets at the cost associated [with] auto insurance.”
In addition to a rate cap, the government is planning to change regulations so that drivers have the option to pay their premiums in installments, according to Horner.
There are also plans to grant the Automobile Insurance Rate Board (AIRB) the ability to demand that insurance companies return excess profits to consumers.
Will this solve Alberta’s insurance woes?
Responding to the government’s planned reforms, the Insurance Bureau of Canada (IBC) noted that Alberta’s definition of a good driver applies to roughly 80% of drivers in the province. Meanwhile, another 10% see rate caps through the Grid framework.
“Rate caps have been implemented before in Alberta and elsewhere with the same result – less choice, and more expensive coverage,” said Aaron Sutherland, who serves as IBC’s vice president for Pacific and Western regions.
Alberta’s high premiums are driven by rising legal costs, theft, and inflationary increases in vehicle repair costs, Sutherland added. Implementing another rate cape would only threaten the “viability and competitiveness” of an already strained system.
He said this approach “creates the best balance between a tort and no-fault insurance system,” allowing drivers more control over their coverages while doubling treatment and care for those insured.
“Most importantly, [it] could reduce premiums by $200 on average,” Sutherland said.
Alberta imposed a rate freeze in January to help drivers with ballooning insurance costs. The freeze will be lifted by the end of the year.
What are your thoughts on this story? Feel free to comment below.
Keep up with the latest news and events
Join our mailing list, it’s free!