The Insurance Bureau of Canada (IBC) is raising alarms over the potential fallout from the recent Calgary hailstorm, warning that the volume of auto insurance claims could intensify existing pressures on Alberta’s insurance market, possibly driving more insurers out of the province.
The existing rate cap on auto insurance premiums is cited as a key factor in what IBC sees as an ongoing crisis in Alberta.
The August 5 hailstorm, now the second-largest insured loss event in Canadian history, has resulted in approximately $2.8 billion in insured damage, with 130,000 claims filed. Of these, around 70,000 were for vehicle damage, contributing to an estimated $900 million in auto insurance claims.
IBC Western and Pacific vice president Aaron Sutherland (pictured) declared: “The Calgary hailstorm will add $900 million in unexpected claims cost pressures at a time when Alberta’s auto insurance system is in crisis due to the province’s rate cap.
“Under the rate cap, auto insurers are unable to recover from the growing cost of claims over the past two years. This has created a dire economic environment that has forced several companies to leave Alberta’s auto insurance market, limiting competition and choice for consumers.
“Unless the rate cap is removed, the high number of new claims from the hailstorm will contribute to Alberta’s already tenuous market conditions, which may result in more insurance carriers making a similar exit from the market.”
A similar warning was previously issued by credit rating agency Morningstar DBRS, which believes that more are likely to follow those that already left the province.
“Even those who do not have plans to withdraw from the market per se may be implementing cost savings measures that are reducing the accessibility and availability of auto insurance, given the lower relative profitability of the Alberta auto product and its uncertain future,” the rating agency pointed out.
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