Alberta’s United Conservative Party says it will be making an announcement later this week about the culmination of the province’s deliberations on auto insurance reform in the province.
CBC reported Monday this announcement will detail the government’s intent to lift or increase the rate cap and possibly transition toward a no-fault insurance system.
Citing unnamed sources, the public broadcaster reports the government could increase the rate cap to permit 7.5% increases or more on auto premiums. That would almost double the current rate cap for good drivers, which limits rate increases at 3.7%.
As of press time, Canadian Underwriter has been unable to independently verify CBC’s reporting.
As for legal system reform, CBC reports Alberta Premier Danielle Smith has approved the province moving toward a no-fault insurance system, which would disallow injured parties from suing the other parties and their insurer in the event of an auto accident.
Alberta currently operates under a tort system which allows injured parties legal recourse following a collision.
“You absolutely can bring rates down if you go no-fault,” Alberta Premier Danielle Smith said in an earlier comment to the media, when asked this summer about litigation costs.
“On the other hand, there are people who have been injured who want the ability to sue,” Smith said in June, long before the CBC’s reporting. “So that’s what we’re consulting on right now. Do people want us to do that?”
Alberta Finance Minister Nate Horner told reporters Tuesday — about 24 hours after CBC’s reporting — that an auto insurance announcement will be made this week.
“We will be having an announcement before the end of the week on auto insurance,” Nate Horner told CityNews reporters. “I’m afraid I’ll have to leave the details until then, but it’ll be the culmination of the consultation and studies that we’ve done.
“The system is in peril right now. Changes will have to be made [to] provide Albertans with great insurance at an affordable price, at least comparatively,” Horner said.
At the Insurance Brokers Association of Alberta’s conference in May, regulators confirmed the industry could expect to see auto insurance reform this fall. At the time, the government was conducting public consultations on its actuarial report by Oliver Wyman, which the province commissioned to inform its decision on reform options.
The insurance industry has been lobbying for auto insurance reform in Alberta well before the UCP put the rate cap in place earlier this year. That cap, auto insurers say, citing a report by Alberta’s insurance superintendent, has impaired auto insurers’ profitability, which in turn has caused some insurers to limit capacity, if not withdraw, from Alberta’s auto insurance market.
“And if we look in particular in Alberta…where auto insurance [is] capped, we actually can see a very similar trend line…to what they saw in California, where wildfires were raging for a number of years [and] insurers were forced to sell the product at a loss,” Celyeste Power, president and CEO at Insurance Bureau of Canada, told attendees at KPMG’s 2024 Insurance Conference on Tuesday.
“And what has happened, insurers have left the market, availability has very much shrunk, and governments, basically, they don’t know what to do,” she said. “Now it’s become such a crisis that they’re unsure of what to do to get it back. So a great way for us to avoid that is obviously to get the regulatory balance in a good place.”
A recent report by Alberta’s Superintendent of Insurance estimated roughly one-third of the 67 auto insurers that wrote Alberta business in 2023 lost money on Alberta automobile insurance.
Thus far, three auto insurers have pulled back from the Alberta auto market, citing profitability concerns.
In June, Definity’s subsidiary Sonnet announced it would phase its auto insurance operations out of the province.
Aviva announced this summer it would tighten its underwriting rules for private passenger auto in Alberta, and soon after announced it would phase out its direct-to-consumer auto business, Aviva Direct.
Zenith Insurance Company terminated its relationship with an Alberta brokerage that was selling its auto insurance during the province’s earlier 2023 rate cap (which was then renewed in 2024).
And Intact, Canada’s largest insurer, said in an earnings call it’s “appetite in this province is reducing” if the rate cap remains in place.
This is a breaking story and we will have more information once it becomes available.
With files from associate editor Jason Contant.
Feature image by iStock.com/LIVINUS
