Alberta’s automobile insurance premiums have been a rollercoaster ride over the past few years and the premiums keep going up. From rate caps to new rules, and even plans for a no-fault system, drivers and insurers have faced many changes. This article will take you through the key events and explain why these changes matter.
1. NDP Government Rate Cap – November 2017
The NDP government implemented a rate cap that limited annual auto insurance premium increases to 5%. This cap was intended to protect consumers from steep rate hikes. However, insurers argued that it led to financial strain as they couldn’t keep up with rising claims costs, resulting in some insurers paying out more in claims than they collected in premiums.
Following the leadership change in 2019, the UCP government did not renew the rate cap, allowing insurers to adjust premiums without the 5% annual limit that had been in place from 2017.
2. Direct Compensation for Property Damage (DCPD) – January 2022
Alberta introduced the Direct Compensation for Property Damage (DCPD) system. Under DCPD, if you are not at fault in a collision, your own insurance company will cover the damage to your vehicle without impacting your driving record. This change aimed to streamline the claims process, reduce administrative costs, and align premiums more closely with repair costs.
3. UCP Rate Pause – January 2023
The UCP government announced a freeze on new rate approvals for private passenger auto insurance premiums until the end of 2023. This decision was made to address concerns about the rising cost of living and inflation.
4. Rate Cap Adjustment – January 2024
The UCP government introduced a new rate cap allowing insurers to increase premiums by up to 3.7% for drivers classified as “good drivers”. This adjustment aimed to balance affordability for consumers with the financial needs of insurers.
Continued Financial Pressures: Despite the rate cap, insurers continued to face financial pressures due to rising claims costs, increased vehicle repair expenses, and extraordinary events like the 2024 Jasper wildfire and Calgary hailstorm which totaled over $4 billion in insured losses.
5. Current System – January 2025
Rate Cap Adjustments:The rate cap for good drivers has been adjusted to a combined 7.5%. This includes a 5% cap on general rate increases and an additional 2.5% to cover natural disaster-related costs.
The rate cap aims to balance the need for affordable premiums with the financial viability of insurers, who have faced rising costs due to legal claims, repairs, and natural disasters.
6. Proposed Shift to No-Fault Auto Insurance – 2027
The Alberta government has announced plans to transition to a no-fault auto insurance system by January 2027. Under this system, each driver’s insurance policy will cover their own damages and medical expenses, regardless of who is at fault.
This change aims to reduce costs and streamline the claims process, but it has faced criticism for potentially limiting the rights of injured parties to seek fair compensation. The no-fault system will prevent collision victims from suing other drivers or their insurers, except in cases of catastrophic injuries or criminal offenses.
The government has indicated that if these measures do not sufficiently lower costs for consumers, they may consider a public auto insurance option as a last resort.
Who are the key stakeholders?
1. Consumers
Claims and Repair Costs: Consumers’ claims for vehicle repairs, medical expenses, and other damages have steadily increased. Factors such as advanced vehicle technology and higher repair costs have driven up premiums.
Natural Disasters: Events like the 2024 Jasper wildfire and Calgary hailstorm have led to a surge in claims, further increasing premiums.
Driving Behavior:Factors such as traffic violations, and risky driving habits now have a significant impact on insurance premiums. That can affect the coverage options available to you.
2. Auto Insurers
Financial Viability:Insurers have faced financial pressures due to the rate caps and freezes imposed by the government. These measures restricted premium adjustments, causing financial strain.
Market Competition: Rate caps and freezes have affected market competition. Some insurers have exited the province or reduced overage options in Alberta. This has impacted the overall availability and pricing of insurance.
Administrative Costs: Insurers have incurred higher administrative costs due to the complex claims process and regulatory requirements. The 2022 DCPD system aimed to streamline processes but brought significant costs.
3. Personal Injury Lawyers
Litigation Costs:Personal injury lawyers have significantly impacted premium costs by driving up litigation expenses and judgements. Under the current at-fault system, injured parties often sue for compensation,. This leads to higher legal fees and settlements.
Claims Frequency and Severity: The presence of personal injury lawyers can increase the frequency and severity of claims, as they work to maximize settlements for their clients. This has contributed to rising costs for insurers.
4. Alberta Government
Policy Decisions:The Alberta government has played a crucial role in shaping the auto insurance market through various policy decisions. These include implementing and adjusting rate caps, introducing the Direct Compensation for Property Damage (DCPD) system, and proposing a shift to a no-fault insurance system.
Rate Caps and Freezes: The government’s decisions to impose rate caps and freezes have aimed to protect consumers from steep premium increases. However, these measures have also led to financial strain for insurers, limiting their ability to adjust premiums in line with rising claims costs.
Market Stability:The government’s interventions have impacted market stability, with some insurers reducing their presence or coverage options in Alberta. This has affected competition and the overall availability of insurance.
Summary: Alberta’s auto insurance landscape has seen constant change, with rate caps, new systems, and ongoing government intervention shaping the market. While the latest adjustments aim to balance affordability and insurer sustainability, the long-term impact remains uncertain. With a shift to no-fault insurance on the horizon, the future of auto coverage in Alberta is still unfolding. Only time will tell how these reforms will affect drivers, insurers, and the industry as a whole.
Let’s tackle a controversial, often annoying topic: insurance payments. Here are the top five things consumers generally dislike about insurance.
Number 5: Disputed Claims
When you file an insurance claim, there might be instances where the insurance company questions whether your claim is valid or covered under your policy. This can lead to disagreements and frustration during the claims process.
Number 4: Lengthy Claim Process
One major complaint is the time it takes to settle an insurance claim. The process can be long and drawn out, causing inconvenience and delays when you need financial assistance for repairs or medical expenses.
Number 3: Limited Protection
Some insurance policies have limitations that provide insufficient coverage, leaving policyholders with unexpected costs. Exclusions or restrictions in the policy can lead to disappointment and a feeling of being let down when you need insurance the most.
Number 2: Confusing Coverage
Understanding insurance coverage can be a challenge. The policy language and terminology can be difficult to comprehend, making it hard to determine what is covered and what is not. This confusion can create frustration when making sense of your policy or filing a claim.
And now, the Number One complaint consumers have about insurance is…
Drum roll…….
Number 1: High Costs
The most significant issue people face is the high cost of insurance. It can be disheartening to see premiums increase, even if you have never made a claim. Let’s explore some reasons why insurance costs can rise:
Industry Trends: Insurance companies adjust premiums based on industry-wide data and experiences. If there is a rise in claims or costs across the industry, it can lead to higher premiums for all policyholders.
External Factors: Factors like inflation, government regulations, and the overall economic climate can influence insurance rates. These factors affect the cost of claims and an insurance company’s ability to provide coverage, leading to increased premiums.
Risk Factors: Insurance premiums are often based on risk assessment. Even if you haven’t made a claim, other risk factors associated with your business or industry may contribute to higher premiums. Changes in the risk landscape, increased competition, or emerging risks can necessitate higher premiums to offset potential losses.
Policy Adjustments: Insurance policies are periodically reviewed and updated to reflect changes in the business environment, industry standards, or regulatory requirements. Premiums can be adjusted during policy renewals to account for these changes.
Loss History: Insurance companies consider the collective loss history of businesses similar to yours when determining premiums. If businesses in your industry or with similar characteristics have experienced increased claims, it can impact premiums for everyone in that category.
While these complaints are valid, it’s important to remember that insurance operates on shared risk principles. Premiums from all policyholders help cover claims costs for those who experience losses. As an insurance broker, I am dedicated to assisting you in navigating the complexities of insurance.
Here’s how I can help:
Annual Insurance Review: I review your insurance policy yearly to ensure it aligns with your current needs and make any necessary adjustments.
Comparison for Better Options: I can explore alternative insurers to find better coverage options that suit your requirements, ensuring you have access to the best available choices.
Staying Informed: I stay updated on industry trends and changes in the insurance landscape, enabling me to provide you with relevant advice and insights.
Risk Control Recommendations: I offer suggestions to reduce risks and potentially lower insurance premiums. These recommendations may involve implementing safety measures or security systems to prevent accidents or losses.
My ultimate goal is to provide you with the most suitable insurance options and support you in making informed decisions. If you have any questions or concerns regarding your insurance, please don’t hesitate to contact me. I am here to help you safeguard what matters most to you.
Stay tuned for more information about complaints number two through five.
Effective January 1, 2022, the Direct Compensation for Property Damage Regulation will change the way vehicle damages are handled in Alberta. Why is the Government changing auto insurance in Alberta and how does that impact you, the consumer?
Why is the Government changing auto insurance in Alberta?
Auto insurance premiums continue to escalate in Alberta for a number of reasons including:
Newer model vehicles involved in a collision cost more to repair because of the sophisticated computer systems. A small bump can easily cost $2,000 just to reset the systems.
Alberta is now the vehicle theft capital of Canada. Although Alberta represents only 12% of the Canadian population, we represent 27% of all vehicles stolen across Canada. In 2019 Ontario logged 23,992 stolen vehicles while Alberta came in at 23,535!
Alberta has more catastrophe claims than any other province in Canada. That includes flood, fire and hail claims.
The Government of Alberta in conjunction with industry realized that streamlining the claims process could save money and help stabilize or even reduce premiums.
How does the Government changing auto insurance impact you, the consumer?
Effective January 1, 2022, if you are involved in an auto collision, you will deal with your own insurance company with respect to your vehicle damages.
If you are at fault, you must carry collision coverage to recover your losses, subject to your deductible.
If you are not-at-fault, DCPD will apply and you will still deal with your own insurance company. All insurers must offer a zero deductible option for DCPD.
If you choose a deductible, this would help reduce your premium, however the deductible will apply to a claim, and you can’t recover the deductible amount from the at-fault driver.
Fault and/or the degree of fault is now clearly outlined in the Regulation.
How will this affect my claim and my premium?
Because you are now dealing directly with your own insurance company, your damages will be handled more efficiently and without the complications of dealing with the at-fault driver’s insurance company. It also eliminates the costs involved with subrogation. That’s where insurance companies have the right to recover the vehicle damage costs from the negligent at-fault driver.
It is estimated that 42% of drivers will see a reduction in their premiums, 15% no change and 43% will see an increase of premium. These changes will more accurately reflect the cost to repair your vehicle. Owners of less expensive vehicles that cost less to repair will typically pay less for their insurance. Similarly, owners of more expensive vehicles that cost more to repair may pay more. It’s a fairer system for everyone.
Do you have to do anything with regard to your insurance?
No, as the DCPD legislation is automatically effective January 1, 2022. One word of advice, however. If you do not carry collision coverage in your auto insurance contract and you are at-fault for a collision, you will have to deal with your repairs out of your own pocket, just like you do today.
In Alberta, it is the law that you carry a minimum of $200,000 Third Party Liability, Accident Benefits, and soon DCPD coverage. All other coverage remains optional. However, it is important that you understand what the optional coverage includes and also what extensions of coverage you may need. Always speak to your insurance broker to review the options.
Heather Cournoyer, CIB, CIP, is a seasoned insurance professional specializing in serving the needs of business in Alberta and BC. She believes that consumers need to understand their insurance program so that there are no surprises in the event of an unfortunate unforeseen loss. Contact her at heather@thinkinsure.ca or 587-597-5478 for further information.
Long gone are the days when “barn raisings” were popular. For those of you who don’t know what barn raisings are check out the link at wikipedia. https://en.wikipedia.org/wiki/Barn_raising
If a member of a farming community lost his barn to fire, the other community members would pool their resources and help that family rebuild. In some cases, it was not voluntary, but required. There are other applications similar where the loss of horses, equipment etc. for one community member would bring the rest of the community together to help. We see a form of that today on social media with ‘Go Fund Me’ campaigns to help those in need of financial assistance after a loss or a medical emergency. A lot of people contributing a small amount each often makes the life saving difference.
People form social groups because there is safety in numbers. As society became more complex the concept of banding together to help people and businesses in their time of loss has evolved. It’s become a financial transaction in a contract of indemnity, which transfers the cost of risk to a third party for a fee. Rather than share time and resources, consumers now pay a premium to an insurance company. In return, the insurance company manages the pool of funds and assumes the risk. Some of us have insured losses and the insurer pays to make us whole, hence the term ‘Indemnity’. Others, who are fortunate enough to have no losses, are secure in the fact that they would be indemnified in the event of a loss, be it property damage or for damages sought as the result of our negligence, alleged or otherwise.
The losses of the few are paid by the premiums of the many.
Insurance rates are currently on the increase for many classes of business across Canada, and consumers are justifiably upset. Many believe it is just another money grab, a way to increase the insurance industry profits at the expense of the consumer. As an insurance industry member, I know how tough it is when costs go up and our income from our business or from our employment is down.
What if insurance as we know it, didn’t exist. Take a look at some facts!
In 2018 Canadian Property & Casualty Insurers (Source IBC Facts Book*)
Paid $39.1 BILLION in claims.
They employed 128,300 individuals
Paid $9.4 BILLION in taxes and levies to federal and provincial governments
Helped recover $23 Million in stolen vehicles
If insurance didn’t exist, would it still be possible to;
Get a mortgage on your home?
Borrow money to buy a new car?
Borrow money to buy stock and equipment for your new business?
Lease space for your new business?
Import/Export and sell goods from/to other countries?
The short answer is NO.
Bottom line is this. The insurance industry and the people in it underpin the economy by financing risk. In any industry there will be dissatisfied customers, people who are confused and need a little extra assistance or education. A little knowledge is a dangerous thing. A more in depth understanding of how the insurance industry works would be helpful in defusing some of that anger and dissatisfaction. The problem is….. where to begin with that explanation? The rules and regulations under which insurers world wide are required to operate add a significant cost element. A good example is in the automobile insurance segment. Government interference in what has become a political issue has resulted in a tide of red ink. No other private or public business suffers this level of interference in their operations. Return on equity figures for the insurance industry would not be acceptable in any other business facing the same degree of risk. An Example? Nobody criticizes the Chartered Banks for their huge profits.
As mentioned above, a little knowledge is dangerous, and that is because it is often out of context. If you want a little more knowledge that is relevant and tailored to your needs and level of understanding an independent broker is your best option. More important is a broker willing to spend the time to provide you with information that is relevant to you. Heather Cournoyer is that kind of broker. Call me and find out. There is no charge for a consultation!
Overall the majority of individuals serving the consumers are doing their best.
If you want to know more check out my previous blogs:
Benjamin Franklin said there were only two things certain in life: death and taxes. But I’d like to add a third certainty: Insurance.
We can’t do much about death although advances in medical technology and better nutrition has done a great deal to prolong life.
As for taxes, they are imposed on us. Do the following comments sound familiar?
“Why do I have to pay school taxes.I don’t even have any kids?”
“I think the government should pay for it.They have lots of money.”
“I’ve paid into employment insurance all these years so I’m not going to look for a job until my benefits run out”
When it comes to insurance, these are just a few of the comments I’ve heard over the years.
“I’ve never had a claim why are my premiums going up?”
“I’ve been paying insurance for years and it’s my turn to collect”
“The insurance companies have lots of money so why shouldn’t I pad my claim?”
“Insurance companies are always just looking for a way to deny my claim and rip me off!”
Taxes and insurance both often feel like another $$cash grab$$, just a hand in our wallets for no perceptible return. As far as taxes go the waste is in the way in which governments spend. We do need to have some way to fund social infrastructure even if we think government should only be responsible for taking out the garbage and making sure sewage always runs downhill. Add to that our social responsibility says to set aside a little bit for those who are in need. So yes, some taxes make sense.
Insurance premiums come right out of our pockets and if a claim is never made, it does seem like a wasted expenditure. Purchasing insurance is not always voluntary. Mandatory automobile insurance is a good example although purchasing the minimum statutory requirement is not a good idea. (As a side note, the statutory minimum auto insurance is not insurance at all, but a financial responsibility certificate. But that’s another story.) It is a personal choice as far as physical damage insurance is concerned, unless your vehicle is financed. The banks need to secure their risk, be it for a loan or mortgage or lease on real property. The choice is to walk everywhere and live in a tent, or buy/lease a vehicle and a house.
When we think about insurance or taxes there is a perception that this seemingly endless supply of money is coming from “them” when in fact every dollar actually comes from our contributions to “them” in the form of premiums or taxes. There is one major difference between the two, and it’s huge. Insurance companies are typically privately-held or public companies that must operate at a profit. Unlike governments, Insurers are not allowed to borrow money to pay for increased costs and must meet a series of tests in order to remain licensed.
The basic principle states that the premiums of the many pay the losses of the few. In order to remain viable and in compliance with solvency regulations insurers therefore need to set premium levels accordingly. An insurer going broke is not in a position to pay your claims when you do have one.
How are the dollars that you pay for your insurance every year spent?
Whether it’s taking your kids to school, driving on the roads, collecting employment insurance, or going to the hospital, the money has to come from somewhere. This also includes such things as repairing your car after a collision, redoing your basement after a flood, rebuilding your business after a fire or being sued and having your insurance defend you and pay for the consequences of your negligence.
The fact is that insurance in general makes it possible for members of society to be financially responsible in the event of unforeseen disaster. For this reason we are all protected, not just by the insurance we choose to purchase for ourselves, but by the insurance purchased by others in our society who share our roads, provide our services, and who manufacture and ship all of the myriad goods and commodities society requires.
Without insurance to backstop the risk, nothing would be built, manufactured, sold or shipped. The houses we live in, the roads we drive on, or the getting the sewage directed downhill and the clothes on our backs would not be provided. We would indeed be walking everywhere and living in tents, assuming we could make them ourselves.
The next time your insurance premium comes due, by all means complain, grit your teeth and call your broker to inquire about the best way to reduce the cost. An experienced broker will educate you and help you make an informed decision about how to best manage and finance your risk.
When your tax bill comes due, complain and grit your teeth, then just pay it and appreciate the privilege of living in this country. Unlike with Insurance, there is nobody to really talk to who can be of much help.
In my May article “What’s going on with my Property insurance? Where’s my quotation?” we talked about increased premiums and the number of insurers no longer writing certain classes of business in property insurance.
Is pricing and availability for Liability Insurance any different? No – not really.
There are certain classes of businesses where many insurers who may have offered coverage are lapsing renewals and not offering quotations for new business.
And here’s news hot off the press. Insurance companies are in business to make a profit just like any other business owner. When a certain class of business is not generating enough revenue to pay for the claims, they will stop writing that class. It’s no different than any other business owner who can’t sell a product at a loss.
Is there anything you can do? Yes. Here are a few tips for you and some examples of classes of business that are prone to higher losses.
1. Know your premises. Are there areas that could lead to a slip and fall claim? Stairs, parking lots. Keep maintenance logs that record time, dates, conditions of inspections. Normally you will want to have one person or department responsible and keep those records for up to 5 years!
Lawsuits arising from slip and fall claims continue to increase both in frequency and severity. Building owners and snow removal contractors are feeling the pressure of increased premiums. As recently as six months ago, I was aware of several Lloyd’s Syndicates and a number of domestic insurers who were still providing coverage for snow removal. The premiums were increasing however coverage was still available.
Now there are fewer domestic insurers writing this class and many of the Lloyd’s Syndicates have pulled out as well. This is not the first time and it won’t be the last. In a Canadian Underwriter Article in 2002, https://www.canadianunderwriter.ca/features/snow-no-mercy/ they speak to some of the issues; under-priced premiums, increased claims for slip and falls and loosely-worded contracts.
2.Be careful when preparing or signing any contracts. Are their ways of limiting your liability or perhaps transferring that risk? Are you assuming a risk you shouldn’t be? Does a Hold Harmless Agreement work for or against you?
Recently I went to use the services or firm who wanted me to sign an agreement holding them harmless should they cause damage to my property, whether they were responsible or not? Do you ever read those agreements before signing them? Might be a good idea.
3.Obtain Certificates of Insurance. You want to ensure that all suppliers and sub-contractors carry their own Liability insurance. In some cases, you may wish to explore being an additional insured on their policy.
Whether you are a business owner or homeowner, anyone hired to work on your premises must carry insurance. Let’s take the example of the homeowner who decides to create that awesome “great room”. The contractor removes the bearing wall and without the proper support, the entire structure of the roof is compromised. Without insurance to back up the subsequent property damage, the homeowner can be stuck with a huge repair bill.
Be proactive in protecting yourself from liability claims. Insurance is not a “guaranteed product”. The inability to get affordable insurance coverage could put you out of business.
Heather is a commercial insurance broker with over 35 years of experience and welcomes any questions or comments you may have. Email her at heather@thinkinsure.ca
