Alberta
Auto Insurance affordability: Province says long term solutions may include public insurance offering
Good drivers to benefit from auto insurance changes
New reforms will address the pressing issue of automobile insurance rates in the province as the government explores longer-term solutions.
Alberta’s government is exploring every possible avenue to provide relief to Albertans. Albertans with good driving records would experience price protection, ensuring their insurance rates do not increase higher than inflation. The proposed reforms would start Jan. 1, 2024.
“We know that Albertans have been struggling with their auto insurance rates and that’s why we’ve been working hard to find solutions. I’m pleased that we can work to bring forward these new measures to help. With inflation and the affordability crisis making life more expensive for Albertans, we will continue working to ensure that the measures we take are not only affordable but also sustainable in the long run.”
Alberta’s government will be taking further action to amend regulations, ensuring that insurers must offer payment plan options so Albertans would not have to pay the full amount for their coverage upfront. These changes would ensure the auto insurance industry can continue to cover claims costs and protect Alberta drivers while providing more relief to Albertans.
Additionally, changes would grant Alberta’s Automobile Insurance Rate Board (AIRB) the authority to direct auto insurers to return premiums to Albertans in years when insurance industry profits are significantly higher. AIRB could also request a rate filing from an insurer at any time to review and possibly lower auto insurance rates if needed.
“We understand the struggles many Albertans are facing, and we are working to ensure Albertans can afford the coverage they need. Achieving affordable auto insurance is a major commitment for our government and this is only the first step in delivering on that promise. We value the sustainability of the insurance industry and call for increased collaboration from insurers as we continue the work to address these issues.”
“Affordability continues to be a major concern for Albertans when the cost on every day essentials rises and makes it tough to make ends meet. That’s why we continue to build on our existing affordability measures to help stabilize costs. This auto insurance reform will help do this in the short term.”
Alberta’s government is closely examining more long-term solutions to make Alberta’s auto insurance industry affordable and sustainable.
The current rate pause will remain in effect to ease the burden on Alberta drivers until the end of 2023. Proposed reforms for 2024 would not impose a dynamic price ceiling on the rate increases insurers can request but would help control how they are distributed among customers, particularly those with good driving records. Any rate increases in 2024 will be carefully monitored to ensure they are reasonable and justifiable. Albertans should continue to shop around to find the best insurance coverage for them.
“As the consumer representative on the Automobile Insurance Rate Board, I ensure that Alberta drivers are considered in all board decisions, including changes to insurer rating programs. I believe protecting good drivers from unexpected rate increases is a win for Alberta consumers. During a time of affordability challenges, this action will provide price stability and predictability for Alberta families.”
The government has commissioned an in-depth analysis by an external consultant concerning longer-term reforms. A draft report is expected by the end of 2023, with the final report slated for the first quarter of 2024. The results of this analysis will inform the government’s long-term reforms.
Quick facts
- The description of a driver with a good record is adapted from the AIRBs guidance for the grid rating program. This includes anyone without the following:
- one or more at-fault accidents in the last six years
- any Criminal Code traffic convictions in the last four years
- any major traffic convictions in the last three years
- more than one minor traffic conviction in the last three years
- In Alberta’s competitive marketplace, Albertans can sometimes get better rates by shopping around and exploring their options.
- Albertans should continue to work with their insurance companies or brokers to get the best rates.
- Alberta drivers can get discounts of up to 20 per cent for bundling their home and property insurance, in addition to discounts for good driving behavior.
Related information
At 17:00 of the video here, A reporter’s question about a potential public insurance offering in Alberta is confirmed.
From the Fraser Institute
By Tegan Hill
According to the recent mid-year update tabled Thursday, the Smith government projects a $4.6 billion surplus in 2024/25, up from the $2.9 billion surplus projected just a few months ago. Despite the good news, Premier Smith must reduce spending to avoid budget deficits.
The fiscal update projects resource revenue of $20.3 billion in 2024/25. Today’s relatively high—but very volatile—resource revenue (including oil and gas royalties) is helping finance today’s spending and maintain a balanced budget. But it will not last forever.
For perspective, in just the last decade the Alberta government’s annual resource revenue has been as low as $2.8 billion (2015/16) and as high as $25.2 billion (2022/23).
And while the resource revenue rollercoaster is currently in Alberta’s favor, Finance Minister Nate Horner acknowledges that “risks are on the rise” as oil prices have dropped considerably and forecasters are projecting downward pressure on prices—all of which impacts resource revenue.
In fact, the government’s own estimates show a $1 change in oil prices results in an estimated $630 million revenue swing. So while the Smith government plans to maintain a surplus in 2024/25, a small change in oil prices could quickly plunge Alberta back into deficit. Premier Smith has warned that her government may fall into a budget deficit this fiscal year.
This should come as no surprise. Alberta’s been on the resource revenue rollercoaster for decades. Successive governments have increased spending during the good times of high resource revenue, but failed to rein in spending when resource revenues fell.
Previous research has shown that, in Alberta, a $1 increase in resource revenue is associated with an estimated 56-cent increase in program spending the following fiscal year (on a per-person, inflation-adjusted basis). However, a decline in resource revenue is not similarly associated with a reduction in program spending. This pattern has led to historically high levels of government spending—and budget deficits—even in more recent years.
Consider this: If this fiscal year the Smith government received an average level of resource revenue (based on levels over the last 10 years), it would receive approximately $13,000 per Albertan. Yet the government plans to spend nearly $15,000 per Albertan this fiscal year (after adjusting for inflation). That’s a huge gap of roughly $2,000—and it means the government is continuing to take big risks with the provincial budget.
Of course, if the government falls back into deficit there are implications for everyday Albertans.
When the government runs a deficit, it accumulates debt, which Albertans must pay to service. In 2024/25, the government’s debt interest payments will cost each Albertan nearly $650. That’s largely because, despite running surpluses over the last few years, Albertans are still paying for debt accumulated during the most recent string of deficits from 2008/09 to 2020/21 (excluding 2014/15), which only ended when the government enjoyed an unexpected windfall in resource revenue in 2021/22.
According to Thursday’s mid-year fiscal update, Alberta’s finances continue to be at risk. To avoid deficits, the Smith government should meaningfully reduce spending so that it’s aligned with more reliable, stable levels of revenue.
Author:
Better, faster, more affordable auto insurance
Alberta’s government is introducing a new auto insurance system that will provide better and faster services to Albertans while reducing auto insurance premiums.
After hearing from more than 16,000 Albertans through an online survey about their priorities for auto insurance policies, Alberta’s government is introducing a new privately delivered, care-focused auto insurance system.
Right now, insurance in the province is not affordable or care focused. Despite high premiums, Albertans injured in collisions do not get the timely medical care and income support they need in a system that is complex to navigate. When fully implemented, Alberta’s new auto insurance system will deliver better and faster care for those involved in collisions, and Albertans will see cost savings up to $400 per year.
“Albertans have been clear they need an auto insurance system that provides better, faster care and is more affordable. When it’s implemented, our new privately delivered, care-centred insurance system will put the focus on Albertans’ recovery, providing more effective support and will deliver lower rates.”
“High auto insurance rates put strain on Albertans. By shifting to a system that offers improved benefits and support, we are providing better and faster care to Albertans, with lower costs.”
Albertans who suffer injuries due to a collision currently wait months for a simple claim to be resolved and can wait years for claims related to more serious and life-changing injuries to addressed. Additionally, the medical and financial benefits they receive often expire before they’re fully recovered.
Under the new system, Albertans who suffer catastrophic injuries will receive treatment and care for the rest of their lives. Those who sustain serious injuries will receive treatment until they are fully recovered. These changes mirror and build upon the Saskatchewan insurance model, where at-fault drivers can be sued for pain and suffering damages if they are convicted of a criminal offence, such as impaired driving or dangerous driving, or conviction of certain offenses under the Traffic Safety Act.
Work on this new auto insurance system will require legislation in the spring of 2025. In order to reconfigure auto insurance policies for 3.4 million Albertans, auto insurance companies need time to create and implement the new system. Alberta’s government expects the new system to be fully implemented by January 2027.
In the interim, starting in January 2025, the good driver rate cap will be adjusted to a 7.5% increase due to high legal costs, increasing vehicle damage repair costs and natural disaster costs. This protects good drivers from significant rate increases while ensuring that auto insurance providers remain financially viable in Alberta.
Albertans have been clear that they still want premiums to be based on risk. Bad drivers will continue to pay higher premiums than good drivers.
By providing significantly enhanced medical, rehabilitation and income support benefits, this system supports Albertans injured in collisions while reducing the impact of litigation costs on the amount that Albertans pay for their insurance.
“Keeping more money in Albertans’ pockets is one of the best ways to address the rising cost of living. This shift to a care-first automobile insurance system will do just that by helping lower premiums for people across the province.”
Quick facts
- Alberta’s government commissioned two auto insurance reports, which showed that legal fees and litigation costs tied to the province’s current system significantly increase premiums.
- A 2023 report by MNP shows
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