Alberta’s auto insurance industry is in crisis mode due to provincial rate caps — experts expect more insurers to exit the province

Alberta’s rate freeze

In 2023, the Alberta government froze auto insurance rate filings. It followed that policy in 2024 with a 3.7% rate cap for "good" drivers. The government's definition of "good" drivers captures roughly three-quarters of its citizens.

However, over the past two years, Alberta’s auto insurance system has faced significant costs that are growing in excess of the 3.7% cap:

• Legal costs are up 19%
• The cost of delivering care and recovery benefits to those injured in a collision has risen roughly 27%
• The cost of new and used replacement vehicles has grown 27% and 9%, respectively
• The cost of auto theft is up 55%
• The Alberta government's health levy on auto insurers is up 60%

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How insurers are further impacted

While higher costs and government regulation have created an unsavory financial picture for both insurer and insured, the Superintendent’s annual report also shows how business opportunity is dwindling for carriers in the province:

• Operational results for auto insurers deteriorated to 97% in 2023 (100% is the break-even point)
• Of the companies that lost money, 17 lost more than 10% on the sale of auto insurance
• The rate cap coupled with increasing pressure on claims costs – due to factors such as inflation, growth in severe bodily injury claims, vehicle theft rates and weather-related losses like the August 5 hailstorm in Calgary – continues to put pressure on car insurance stability in the province.

"Rate caps are never a sustainable solution. Unless the rate cap is immediately removed, consumer challenges in the auto insurance market are likely to grow," Sutherland said.

"Only action to address the cost pressures in the system, including legal costs, can improve affordability for drivers. Alberta's insurers are keen to work with the government to make meaningful action a reality."

Sources

1. Alberta Superintendent of Insurance: Superintendent of Insurance 2023 Annual Report (Oct 30, 2024)