Alberta Government Auto Rate Freeze
The Alberta Government Auto Rate freeze and what it means for your insurance.
On January 25th 2023, the Alberta government announced a rate freeze on auto insurance. What’s the real inside scoop on the insurance rate freeze? And what does this mean for your auto insurance?
As your local insurance broker, we have some answers for you. Auto insurance has always been regulated in our province and the rate board monitors all requests for rate increases from insurance companies.
What is a rate freeze?
Previously, when the former provincial government imposed the maximum 5% rate cap on increases it put insurers in a position where automobile policies became extremely unprofitable. Paying out anywhere from $1.25-$1.70 for every $1.00 premium dollar collected. Certainly, insurers are in a position to absorb some of this but over a period of 3 years, the insurance companies began to implement aggressive underwriting strategies, limiting payment plans, collision coverage, and other features that the majority of drivers rely upon.
This time around, there will be no future rate increases approved, so only previously approved rate increases for 2023 will be implemented.
Read our past blog in response to the Auto Insurance Rate Increase (when the freeze was lifted in 2019).
What do the industry experts say?
The Insurance Broker Association of Alberta comments, “If insurers are not able to collect enough premium to pay claims, we will be facing an unstable market environment if this carries on long term. The insurers that support Alberta will be forced to take drastic action in order to sustain the current system and continue to support consumers.
Much like during Alberta’s last provincial rate caps from 2017 to 2019, consumers may face limited options in the marketplace. During the most recent cap, insurance companies were forced to make difficult business decisions of which the effects are still being felt today. A hard freeze on rates will have an even more detrimental impact on consumers.”
The finance minister of Alberta did clarify that insurance companies need to continue to offer physical damage {Optional Section C} insurance for policyholders who require the coverage to protect lienholders and financing company interests in their vehicles. There is also clarification around limiting payment plans for clients, which was a practice put in place by some insurers in response to the rate freeze – essentially halting new business applications for automobile insurance.
What does this mean for you?
There are a lot of reasons for the unprofitable atmosphere, but in general terms, claims are costing way more than they ever have with new technology in vehicles, a more litigious community, and higher medical costs. It is a classic example of government engaging in an industry without a full understanding of the unintended consequences, that ultimately get passed along to consumers in the market.
Recent Data also indicates that Alberta has suffered nearly 60% of all catastrophic losses in Canada in the past few years, and this frequency and severity has certainly impacted sustainable environments for the insurance companies providing coverage across the country.
Just as in 2019, we will see the freeze expire and larger rate increases will likely be approved by the rate board. This will certainly impact most policy holders and lines of business. In general, the freeze will ultimately hurt the industry, consumers, and competition.
What are we doing for you?
In a tough insurance market, we are proactive, prepared, and capable to offer competitive insurance solutions for your family and business. If you are a current Beyond client, you have already been benefiting from our proactive approach to insurance renewals. Each renewal is personally reviewed and we take great care in making sure your coverages and policy information is up to date and that your rates are competitive. We actively go to market for you when a policy has a large increase on renewal, and share the market results of numerous insurers. As we navigate the changing insurance marketplace together, you can rest assured our team is working diligently to provide the service you deserve for your insurance needs.
Have a question?
Get in touch with us any time over social media. You can also email or call your broker directly with any questions you have.
