Alberta UCP announces return of the auto rate cap

Alberta UCP announces return of the auto rate cap

Alberta’s United Conservative Party (UCP) is committed to retaining auto rate caps for “good drivers” into 2024, which auto insurers say would amount to keeping the auto rate cap on 80% of the province’s drivers.  

The province’s proposed auto insurance reforms will include further regulatory intervention, premium payment plans — and even public auto insurance in the province is not off the table, the UCP said during a press conference Wednesday.

Insurance Bureau of Canada (IBC) is concerned the province’s cap on auto insurance rate increases, even if limited to good drivers with no accident history in six years, will threaten the viability of the auto insurance industry. Ultimately, the province’s auto insurers argue, the ongoing cap will do little to improve premiums for drivers. 


Rate cap renewed 

The UCP announced Albertans with good driving records will only see their rates increase as necessary to take into account Alberta’s inflation, per the province’s September 2023 inflation rate of 3.7% (among the lowest provincial inflation rates in the country, the UCP says). This new version of the rate cap is expected to come into effect Jan. 1, 2024.  

UCP defines a “good” driver as anyone except those who have:

  • any at-fault accidents in the last six years;
  • any criminal code traffic convictions in the last four years;
  • any major traffic convictions in the last three years; or
  • more than one minor traffic conviction in the last three years.

Alberta’s Finance Minister Nate Horner said in a press conference he doesn’t know “precisely” how many drivers would qualify under these criteria, “but we’re confident it’s definitely the majority of Albertans.” 

IBC says found roughly 80% of drivers would qualify under the UCP’s criteria. 

Plus, Alberta already caps rates for the 10% of drivers considered high-risk, via the provincial Grid framework, IBC adds.  


More reforms coming

The UCP first announced the universal auto insurance rate cap in January 2023. They imposed the cap until the und of 2023, and said they would review the cap in consultation with the insurance industry. Now, the proposed amendment to the cap is slated for next year.

In addition, the provincial government announced amendments to the Automobile Insurance Rate Board (AIRB), and wants premium payment plan options for Albertan drivers. 

The proposed amendments would give AIRB, which oversees insurers’ profitability, more power to regulate Alberta’s auto insurance industry. If amended, AIRB would have authority to “return premiums to drivers during exceptionally profitable years.”

Alberta’s Premier Danielle Smith said this measure is in place so that “insurers cannot charge rates that are too high during unforeseen events,” which she suggested was the case during the pandemic. 

AIRB would also be able to request a rate filing from an insurer at any time, and “possibly lower rates if necessary,” the government press release reads.  

In 2023, the UCP introduced a reform that would require insurers to provide premium payment plan options to Albertans. 

The measure will be permanently adopted to give Albertans the choice of paying their premiums through payment plans rather than annually. For high-risk drivers, some insurers may charge premium payments up front, as opposed to offering premium payment plans. 

“This additional regulatory intervention and red tape will only add to the growing pressures on drivers’ premiums due to rising legal costs, theft, and inflationary increases in the cost of vehicle repairs,” IBC said in its release. 

Over the past decade, IBC finds automobile insurers in Alberta have paid out, on average, $1.03 in claims, expenses and premium taxes for every $1 collected in premiums, per an AIRB Market Trends Report released this year. 

IBC says the UCP’s proposed measures will cause further strain on auto coverage. The measures could render auto insurers unprofitable, causing insureds to lose coverage options if insurers pull out of the market. 

“Rate caps have been used before, in Alberta and elsewhere, with significant harm to consumers,” the insurers’ association wrote in a background statement. “In Alberta, the current rate pause led to one carrier exiting the market, leaving over 16,000 drivers without coverage.” 


Public auto  

The UCP says they are considering anything that could lower rates for insureds in the long-term — including public insurance. 

In addition to the above reforms, the government has commissioned an external consultant to conduct an analysis on long-term reform options. A draft report is expected by the end of 2023 and a final report by the first quarter of 2024. 

Horner acknowledged the current cap is a short-term solution that does not address the costs in the system. “To make Alberta auto insurance affordable comparative to the other provinces in the country, more will need to be done.”

Responding to a question during a media conference asking if the UCP would consider creating a public auto insurer, Horner said: “I think it would be unfair to be ideological and take anything off the table. We need to look at everything.” 

In a release announcing the reforms, the UCP affirmed: “We are considering all recommendations from Albertans and insurance experts. The insurance models of other jurisdictions, both within Canada and abroad, are also being analyzed.”  


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