What happens in Alberta when auto insurers are not comfortable with their profitability
September 23, 2020 by Greg Meckbach
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The Alberta auto insurance industry is still suffering “hangover” from a 5% cap on rate increases that was abolished more than a year ago, with many insurers not looking for new business, suggests the co-founder of LowestRates.ca.
Data released Tuesday by LowestRates.ca shows that the average Alberta auto insurance rate was 22.7% higher in the second quarter of 2020 than in the same period in 2019. Even motorists 45 and older are paying an average of nearly 20% more.
“Prices need to go up because insurance companies just don’t want new business in Alberta. They just aren’t profitable in Alberta,” LowestRates.ca CEO Justin Thouin said Wednesday in an interview. “It’s actually a hangover from the NDP government’s rate cap and this is going to be an issue until insurance companies can get comfortable with their profitability in Alberta.”
In Alberta, then-finance minister Joe Ceci ordered the Automobile Insurance Rate Board in 2017 not to approve rate increases of more than 5%. It remained in effect until the summer of 2019, a few months after the United Conservatives were elected to power, replacing the NDP.
The 22.7% figure was based on data from LowestRates.ca’s auto insurance quoter, which millions of Canadians use each year to compare rates. LowestRates.ca generates leads — for both brokers and direct writers — from consumers shopping for home and auto insurance.
In its Auto Insurance Price Index Report 2020, LowestRates.ca said Tuesday it found the average auto insurance rate dropped 3.7% in Ontario and increased 17.6% in Atlantic Canada.
That cap imposed in 2017 in Alberta applied across insurers’ auto books of business. Therefore, some clients would have seen rate increases of more than 5%.
The Alberta government did not want motorists to see significant rate increases while the government worked with industry to find a solution, a provincial civil servant told Canadian Underwriter in 2018, speaking on background. At the time, the civil servant said the government needed more data on what is driving auto insurers’ costs up.
“It’s a huge issue still,” Thouin said Wednesday of Alberta auto profitability. “The insurance system in Alberta needs to change. It needs to be an environment where companies want new business and want to insure new drivers and can be profitable.
Part of the reason for the 22.7% increase is many insurers want Alberta auto customers to pay annually upfront instead of monthly, Thouin told Canadian Underwriter. So in some cases, the client is saying, ‘Well I don’t want to pay upfront all at once,’ so they choose a higher rate with another insurer that lets them pay monthly.
“If Alberta auto companies can be more profitable, there will be more competition and better customer service and drivers won’t have trouble finding an insurance company that will let them pay monthly as opposed to annually,” said Thouin. “Competition will always breed better prices in the long run, but in the short run, prices need to go up because insurance companies just don’t want new business in Alberta.”
In its report released Sept. 22, LowestRates.ca broke down auto rate changes in Ontario, Alberta and Atlantic Canada by age group and gender.
In Alberta, LowestRates.ca’s quoting data showed average rate increases, year over year, were:
- 22.2% for men;
- 22.5% for women;
- 23.9% for the 18-24 age group;
- 28.7% for the 25-44 age group; and
- 19.9% for the 45-79 age group.
Feature image via iStock.com/dan_prat
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Surprising to see the 3.7% rate deduction in Ontario. Feels like premiums across Canada are increasing.
I have a 5 star professional drivers rating with the Insurance Bureau of Canada & my Insurance rate has gone up 4,000 per cent in the last Five Years, with no accidents or to tickets. Canadian Underwriters and Insurance Companies are predatory, dishonest, disingenuous, and Scam Artists in my opinion. Sleep well at night? No conscience I guess. As long as your making a living, and to hell with everyone else.
When the money supply is substantially increased, prices will inevitably go up. People mistakenly think that things are getting more expensive. In reality, it’s your money that’s depreciating. Know and understand the difference.
Rate cap has been in place in Alberta for nearly 2 decades.
It wasn’t the NDP that brought it in.
Sloppy reporting.
My auto renewal was in December of 2020. One vehicle was in storage at the time of renewal. On advising the insurer that the stored vehicle was being returned to service in February of 2021 my rate increased $180.00, no changes to coverage, no changes to driving record. Agent advised that rates increased in 2021 and that the company was allowed to reassess my contract because I was taking my vehicle out of storage. Doesn’t seem legal that a paid up annual contract can be increased without cause prior to the term expiring.
What a rotten predatory industry. Just because they are obligated to invest in AAA rated bonds that generate almost no yield…The industry decided to pass the profit hit on the investment side of their business onto consumers in the form of premium increases. No additional SERVICE! No additional Coverage! Rotten, this kind of corrupt anti free market price fixing is the reason why peasants revolt and demand regulation. Smarten up insurance industry and offer a good product for a reasonable price. Insurance costs more in Alberta than the Government run systems in Sask and BC now. Absolutely ROTTEN.
Stop making small claims and driving cars and owning houses you can’t afford. Many people go too far into debt, taking on the maximum loan/debt they qualify for. Then, they expect the insurer to fix every minor collision and problem, because they have no extra money left over at the end of the month. This leads to people making a lot of small claims, which are paid out of everyone’s premiums ( yes, your idiot neighbour, who has made several claims on his home and vehicle, is increasing your rates, because those damages are being paid for with yours, his, and everyone else’s premiums). Not to mention everybody loves technology on their car – I do too – but it drives up the cost of claims. The cost of a bumper has increased by several thousand dollars in the last ten years.
The principle of insurance is, “the loss of the few paid for by the many.” Unfortunately, the amount of claims that are made is just increasing. Look at all the wildfires, claims from 20 20 are still being processed and paid for, meanwhile new record setting claim events are still happening. If every single person makes a claim, the system falls apart
I would advise you, when applying for a mortgage or a vehicle loan, to not take on the maximum amount of debt you are being offered you. Take on 75% or 80% of what they have offered you and work with that. You should not look at the loan you are offered as money gained. You should look at the loan you are offered as debt you are taking on ( yeah, they’ll give you a nice chunk of change at the beginning, but the bigger than chunk of change, the bigger your monthly payments – they want you to take 100% of the debt they are offering you). This will leave you a cushion to help with small repairs and hopefully will prevent you from becoming “house poor.” You will be able to take care of minor repairs on your home in a vehicle yourself, that’s keeping your rates down as well as just being able to take pride in being self-sufficient and not dependant on insurers or government to bail you out of every single minor catastrophe.