Alberta drivers are being hit with higher auto insurance premiums following the recent approval of rate hikes in the province.
The Automobile Insurance Rate Board (AIRB) approved rate hikes for 27 insurance companies last year. The increases range from less than 1% to nearly 30% for basic coverage, according to the Canadian Press.
The board, which is responsible for regulating auto insurance in the province, sees this as a positive for drivers.
“Following nearly two years of rate restriction, some Albertans found it difficult to obtain the coverage they required or access to payment plans,” the board said in a report.
“These actions by insurers were directly related to their inability to receive approval for rates commensurate with the risk.”
Alberta has relatively high rates compared to other provinces and the insurance situation there is a complicated one. In 2017, the NDP government introduced a cap on how much auto insurers operating in the province could raise premiums. Under the cap, AIRB couldn’t approve requested rate increases of more than 5%.
When insurance companies pay out more in claims than they collect in premiums, they move to raise rates. But insurance companies argued that this cap made it challenging to stay afloat, and drove a lot of small brokerages out of the province, which in turn only increased rates more because there was less competition.
Alberta’s current government, the United Conservative Party, let that rate cap expire last September, so it’s hardly a surprise that more than 92% of insurance companies that offer private vehicle coverage had asked for rate changes in the fourth quarter of 2019.
The rate hikes don’t come as much of a surprise, especially to industry experts who viewed the rate cap as only a temporary fix.
The Insurance Bureau of Canada (IBC), for instance, has referred to it as a “band-aid solution.”
“Insurers actually don’t want to increase rates,” IBC’s Celyeste Power told Global News. “They would rather keep their customer happy, give them the best rate possible. But we have seen increasing claims costs over the past few years that have become quite unsustainable, and that’s when you see premiums follow.”
What the province needs, Power said, is long-term auto insurance reform.
Alberta Finance spokeswoman Jerrica Goodwin said in a statement that this is in the works.
“We will be taking action in the coming months to address long-term affordability in a sustainable manner,” she said.
In the meantime, she said, Albertans are encouraged to look around for the best rate on auto insurance.