Alberta’s controversial rate cap on auto insurance is set to expire in two weeks, and drivers are waiting for the provincial government to reveal how they plan to move forward.
Introduced in 2017 by the NDP government, the cap blocks Alberta’s insurance regulator, the Automobile Insurance Rate Board, from approving auto insurance increases of more than 5%. Previously, rate hikes were capped at 10%.
If the cap is lifted, premiums are expected to rise for some drivers.
The 5% cap has been criticized by Alberta’s insurance companies for hurting their finances. In addition to the cap, Alberta’s insurers are required to abide by a “take all corners” rule, which says that they can’t reject any customer’s application for insurance. The two policies were developed to protect customers, but insurance companies argue that they inadvertently hurt drivers by making it harder for smaller brokerages and insurers to stay financially afloat. When these companies are forced to shutter, drivers are left with few insurance options.
The caps also haven’t prevented insurance rates from rising significantly. The average premium increased by approximately 5%, from $1,251 to $1,316 between 2017 and 2018, according to data from the Insurance Bureau of Canada (IBC).
“It hasn't done anything to protect consumers,” Celyeste Power, vice president of the western region for IBC, said of the cap. “Instead, it has taken away availability for consumers. We believe good public policy would be to fix the underlying cause of the problem.”
“Rising claims costs with regards to bodily injury is the number one source of increasing costs within the Alberta auto insurance system.”
Because the cap puts financial strain on insurance companies, it has also resulted in “companies doing things they wouldn’t have otherwise done, like limiting or cancelling monthly payment options for some people or not offering [optional] coverage to some people,” said George Hodgson, CEO of the Insurance Brokers Association of Alberta.
On Thursday, the Alberta Treasury Board and Finance Ministry told the CBC that it is “aware of the timeline on the five-per-cent rate cap and [is] currently considering all options.”