Post-cap, IBC calling for 36.9% auto insurance increase to “ceiling” grid rates

The Insurance Bureau of Canada (IBC) is recommending a 36.9% rate increase to be applied only to the province’s grid rates to compensate for the recent elimination of the province’s cap on minor injuries.
The IBC presented its proposal to the Alberta Automobile Insurance Rate Board on June 17.
Ideally, the recommended adjustment should only be applied to the province’s auto insurance grid rates and not as an industry-wide adjustment, the IBC says in its submission.
But, as the IBC also notes, Alberta’s rate board does not have the authority to apply adjustments to the grid only and not the rest of the industry as a whole.
For this reason, the IBC has asked the Alberta government to change its Premiums Regulation and public policy to allow the board to apply changes to the grid only.
The grid, part of the province’s reforms in 2004, establishes the maximum premium insurance companies are permitted to charge for basic coverage for a private passenger vehicle. “Because the premium grid sets the maximum chargeable premium for basic coverage, most drivers (approximately 80%) do not pay these premiums,” the rate board notes on its Web site.
IBC believes the proposed 36.9% rate increase should apply to the grid rates, and that a regulatory approval process be established for competitive (non-grid) rates, so that individual companies might be allowed to charge rates up to the maximum established by the grid.
IBC noted in its submission that if its preference is not possible, the 36.9% rate hike should be applied as an industry-wide adjustment as of November 2008.
The alternative, the IBC notes, would be to presume that the minor injury cap will be reinstated after the Court of Queen’s Bench declared it unconstitutional late last year. In that case, if the cap were to be reinstated, the rate increase required would only be 3%.
“Due to the unacceptable level of risk associated with the first assumption (Cdn$400 million per year in unfunded liability), IBC would strongly urge the board to assume the Minor Injury Regulation is not in effect,” IBC says in its submission.