Alberta brokers are already fielding clients’ questions about what the province’s auto insurance reforms will do to their rates.
The government’s move to raise the auto insurance rate from the current 3.7% to 7.5% in 2025 is the most common source of confusion among clients, says Caleb Maksymchuk, president of the Insurance Brokers Association of Alberta.
That’s because the actual auto insurance rate cap will be 5%, but Alberta is allowing an additional 2.5% rate rider on top of that.
“All [clients] are hearing is, ‘My rates are going to go up 7.5% this year and 7.5% next year.’ Well, that’s not necessarily the accurate way of depicting it,” says Maksymchuk, who’s also partner and president at Ravenhill Agencies.
Rates to increase 7.5%, but that’s only confirmed for 2025
Starting in January 2025, insurers filing for rate increases with the Automobile Insurance Rate Board will be capped at 5%. Insurers are also allowed an additional 2.5% rate rider to account for natural disaster costs related to the Jasper wildfire and Calgary hailstorm.
A rate rider is a temporary surcharge or adjustment to premiums that addresses specific costs outside of the standard rate-setting process.
And this summer, insurers paid more than $3.68 billion in claims between the Jasper wildfire and Calgary hailstorm. For the latter storm, auto damage claims alone cost $900 million and made up more than half of all claims, according to Insurance Bureau of Canada.
Thus, the good driver rates will be capped at a combined 7.5% in 2025 to account for significant natural disaster costs, according to Alberta’s Treasury Board and Finance.
But the government has not confirmed if the 2.5% rate rider will be in effect in 2026. That’s because it’s too early to tell how NatCats might impact premiums in the upcoming year.
So, it’s important for brokers to specify the 7.5% rate cap is an aggregate increase, but it all depends on regulatory approval of rate filings by individual insurers. Plus, the 2.5% rate rider is not guaranteed for 2026, Maksymchuk explains.
“The accurate way of depicting it [is], we’re going from a 3.7% good driver cap to a 5% good driver cap, and they’ve given an additional 2.5% proviso for the catastrophic losses that occurred here in Alberta this past year,” he says.
“The year is not even done yet, so it will be reviewed in 2026 should [the] additional 2.5% be added.”
No faults with no-fault
The United Conservative Party also announced it’s long-term reform solution — a hybrid no-fault insurance model, which prevents collision victims from suing drivers and their insurers, with some exceptions.
The no-fault model will come into effect in 2027. It’s a move away from the province’s long-held tort model, which allows collision victims to sue at-fault drivers for compensation.
The new, no-fault model would allow for litigation under specific circumstances. For example, accident victims can sue an at-fault driver for damages if the responsible party is convicted of a Criminal Code offence or certain Traffic Safety Act violations (like impaired or distracted driving). Victims can also sue for out-of-pocket expenses that exceed benefits offered under the model.
Brokers are confident the move to no-fault will expedite consumer claims payouts.
“In order to reduce premiums, you need to pull costs out of the system,” says Maksymchuk. “At the end of the day, this is where we’ll see the greatest reduction in premiums and creating a more simple system.”
Insurers, brokers, and regulators alike have all expressed the need for Alberta to reform its tort system. Lawyers, however, have expressed distaste for the limited right to sue.
Clients could still lose coverage, see their rates increase
Overall, brokers are hopeful long-term reform will allow insurers to remain competitive in Alberta.
Several companies have already withdrawn capacity in the market, citing profitability concerns related to the prolonged rate cap.
Roughly one-third of 67 automobile insurers in Alberta have lost money under the ongoing rate cap, which the UCP first initiated in 2023 and renewed the following year. By the time the no-fault model is set to start in 2027, that means the province will have intervened in the auto insurance rate market for four years.
In the meantime, brokers are noticing Alberta insurers creating more underwriting restrictions on auto insurance, says Maksymchuk.
That adds another layer of difficulty for brokers trying to find auto insurance coverage for their clients.
“My fear right now, and what we’re hearing from our members, is the coverage restrictions that are in place and are coming from various carriers,” says Maksymchuk. “[The rate cap] is putting pressure on these insurers to make changes to limit their exposure.”
As the industry awaits the province’s introduction of a no-fault system, which many hope will eliminate cost pressures, “[brokers] just have to work a little harder to ensure that we can get the coverage that our clients deserve,” he says.
Feature image by iStock.com/miniseries
