Changes the Alberta government announced in November 2024 are a great start for making auto insurance better and more affordable for drivers in the province. But there is more to be done.
Here are the auto insurance industry’s recommendations for additional actions government should take to improve auto insurance for Alberta drivers:
Reduce red tape
Rates charged by auto insurers need to be approved by the Automobile Insurance Rate Board (AIRB). This process is slow, costly and cumbersome – ultimately adding to the cost of insurance for drivers. The AIRB and government should move to a use-and-file framework, which would allow auto insurers to adjust rates more quickly based on market changes, including passing savings on to drivers from the incoming Care-First system.
In general, use-and-file is faster, more streamlined and cost effective, as it removes cumbersome administrative burden.
Unlock the free market
Albertans believe strongly in the power of the free market to deliver the best prices, products and service to consumers. It’s time to apply these values to auto insurance.
- End all rate intervention: Rate caps and freezes on insurance premiums are an attempt to stabilize premiums, but they don’t work as intended. They push today’s cost pressures down the road without actually addressing the root cause of increasing premiums. They have a history of doing more harm than good to the people they are trying to protect.Learn more about how intervention into premiums actually makes insurance more costly.
- Remove the Grid framework: Alberta’s Grid framework has not delivered on its original intent of providing new drivers with affordable entry-level premiums. Rather, it penalizes drivers with a history of safe driving habits by forcing them to pay higher premiums in order to subsidize drivers with a history of at-fault claims and infractions. According to an analysis by Deloitte, the subsidization is costing low-risk drivers $65 a year, on average.Government should end the Grid and replace it with a program that is more effective at giving new drivers a break on their premiums. There are other ways to accomplish this worthwhile goal, and the industry looks forward to discussing options with government.
Drop the take-all-comers rule (Adverse Contractual Action Regulation): The take-all-comers rule mandates that auto insurers must offer insurance to any driver who knocks on their door. While this rule is well-intentioned, it has unintended consequences. By requiring insurers to accept all applicants, the rule forces good drivers to pay more because they end up subsidizing the premiums of high-risk drivers. It also squashes competition and specialization by insurers, which ultimately leads to less choice for consumers.
In jurisdictions without such a rule, there are insurers who specialize in certain segments of the market, such as high-risk drivers. Having these “grey market” insurers naturally transitions high-risk drivers into these specialty markets, reducing cross-subsidization, and giving these high-risk drivers motivation to improve their driving so they can return to the standard market.
The take-all-comers rule creates challenges related to pricing, market stability and fairness for consumers. If government wishes to promote a truly competitive and sustainable auto insurance market, it will drop this antiquated rule.
Remove hidden taxes
Unfortunately, Alberta drivers are paying more than they ought to for auto insurance, thanks to a couple of largely unknown taxes.
There is the 4% Insurance Premium Tax that the government levies on the sale of every auto insurance policy in the province. And there is the health levy, which the Alberta government charges to auto insurers. This fee does not exist in many provinces and is especially hidden, as insurers are prohibited from disclosing it on policy documents.
These two hidden taxes combined account for about $100 per auto insurance policy, so dropping them both would mean huge savings for Alberta drivers.
Address crime and those who abuse the system
- Auto theft: Auto theft is big business. Sophisticated and organized crime rings export or re-VIN stolen vehicles and use the proceeds to finance other criminal activities, such as drug trafficking, arms dealing and human smuggling. This is both a financial problem – adding to the cost of insurance – and public safety issue. Unfortunately, it is on the rise in Alberta, with auto thefts claim costs up by 55% between 2021 and 2023, and they continued to rise in 2024. The government should close holes in Alberta’s registry system that allow criminals to commit fraud and take other steps that combat vehicle theft across the province.
- Runaway towing and storage costs: Alberta is experiencing a concerning trend in the towing and storage sector – new, shady operators charging exorbitant fees for towing and storing vehicles involved in a car accident, or towing without the owner’s consent. In one case in June 2024, an insurer was charged nearly $12,500 for a tow and 105 days of storage. In other jurisdictions, this service would cost closer to $2,000. Fortunately, the Alberta government is taking steps to address this issue. We recommend Alberta continue to work with insurers, reputable towing and storage operators, and law enforcement to protect Albertans from these predatory and costly practices that ultimately drive up auto insurance premiums.
Alberta’s insurance industry will continue to talk with government about further auto insurance reforms that would deliver more savings to Alberta drivers.