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March 13, 2020

Changes to Alberta Auto Insurance: Rate Increases

Changes have come to auto insurance in Alberta. Here is what you need to know about the increases to auto insurance rates that will affect Alberta drivers.

Auto Insurance Increases to the Grid Rate Level

In late September, the Alberta Automobile Insurance Rate Board (AIRB) announced an increase to the current Grid rate level by fifteen per cent, effective January 1, 2020. The Grid rate level is set by AIRB and is used by Alberta insurance companies to determine the maximum premium they can charge for basic coverage, which includes third party liability and accident benefits. However, most drivers don’t pay the full Grid rate premium. Insurance companies must calculate the premium for a driver based on both their own internal rate system and the Grid rate, and charge the lesser of the two. Only six per cent of drivers pay full Grid premiums because their insurance provider will usually give them a better deal.

Cap Lifted on Rate Increases

As of August 31, 2019, the Alberta government also announced that it will not continue to limit auto insurance providers to a maximum five per cent annual rate hike. In 2017, the government of Alberta introduced a five per cent annual rate cap on auto insurance premiums to protect consumers from large increases. Unfortunately, over the last several years, insurance claims have increased in cost while rates have not kept pace, causing insurers to operate at a loss. When the five per cent rate cap expired, the government of Alberta determined that it was best to lift the cap so that insurance companies could operate sustainably.

To find new ways to increase the affordability of auto insurance and address the comprehensive coverage issues in Alberta’s auto insurance system, the Alberta government is establishing a three-member advisory committee to research and recommend solutions. The committee will report their findings in the spring of 2020, after which the government will act on these recommendations.

What Does This Mean for Me?

On average, the market is seeing a rate increase of about fifteen per cent, so be prepared to see your premiums increase when you renew your auto insurance policy.

Why Are Rates Increasing?

Costs for auto insurance claims are rising for several reasons, and three of the major culprits include:

1. Increased cost to repair vehicle technology

Modern cars are built with many safety features designed to protect the driver. However, these features also cost more to repair. According to Aviva, the cost to repair a vehicle increased by five per cent from 2017 to 2018.

Low-speed accidents can have high repair costs and can even move the car into a write-off situation. For example, a simple scratch on a bumper could damage a sensor that would need recalibration. From 2014 to 2017, the repair cost of an airbag sensor in a quarter panel went up $1,100, and the cost to repair a front bumper sensor went up by $950. Technology in these newer vehicles requires repair by a skilled technician, which also increases repair costs.

2. An increasing number of injuries

Insurance companies have seen a rise in the number of injury claims in recent years, with bodily injury costs increasing by 54.2 per cent from 2012 to 2017. This is partly because of fewer injuries are classified as minor injuries. In Alberta, there is a $5,202 ceiling for pain and suffering awards for minor injuries. With a large increase in psychological claims and concussions and longer duration of injuries, fewer injuries fall within this cap and cost insurers more to cover.

3. High number of vehicle thefts

Calgary has the highest number of vehicle thefts in Canada. In 2018, nearly seven thousand vehicles were stolen or attempted to be stolen. In Alberta overall, theft is an increasing cause of comprehensive claims, with the frequency of theft claims increasing by sixty-four per cent since 2014. Insuring these losses adds to the increasing costs that insurers in Alberta are facing.

If you have further questions about how the rate increase will impact your car insurance premiums, contact your insurance broker.

Facts for this article have been gleaned from several reliable websites, namely the Alberta Automobile Insurance Rate Board, Insurance Business Canada magazine, Canadian Underwriter, Alberta Treasury Board and Finance, Aviva Canada, and CTV websites.