The Alberta government announced that it will put a pause on any auto insurance rate increases for the rest of 2023 – a decision that has been criticized by the insurance industry.
Finance Minster Travis Toews and Affordability and Utilities Minister Matt Jones announced the pause on rate changes yesterday - which will only impact insurance for private vehicles. The officials also revealed that the province will look at other short- and longer-term measures to put auto insurance costs under control.
But this rate cap has been received poorly by the industry.
“A rate freeze does nothing to improve the affordability of auto insurance in the near term and only pushes today's challenges down the road,” a statement from the Insurance Bureau of Canada (IBC) said.
IBC’s statement, which was released on the same day Alberta put a hold on rate increases, also explained that rate caps have resulted in “significant negative consequences” for consumers, pointing to previous instances in Alberta’s history.
“During Alberta's last provincial rate cap from 2017 to 2019, consumers faced challenges securing the coverage they needed, as insurers were forced to take action to remain viable and continue paying customers' claims. Premiums still increased 12% when the rate cap was in place.”
The Insurance Brokers Association of Alberta (IBAA) also issued a statement against the rate freeze.
“The recent announcement regarding a freeze to Alberta's auto insurance rates is troubling,” the IBAA said. “A rate freeze at this point in time will add more strain to an already fragile segment of insurance, especially with the current state of inflation and the rising costs to repair vehicles. There will be underlying consequences that the average consumer may not be aware of and they will need to be prepared for them.”
IBAA also warned that if insurers are not able to collect enough premiums to pay claims, Alberta “will be facing an unstable market environment” if the freeze lasts for the long term.
“The insurers that support Alberta will be forced to take drastic action in order to sustain the current system and continue to support consumers.”
"We have proposed options to government that would leave money in the hands of Albertans without the consequences of a rate freeze," said IBAA president Barry Haggis. “The IBAA will be working with Alberta brokers to assist them in educating and guiding consumers through the negative effects this freeze will have. IBAA will also continue to work with the government, the Insurance Bureau of Canada, and Alberta's auto insurers to develop a long-term solution to the rising costs of Alberta auto insurance.”
The IBAA had previously issued a statement when the auto rate freeze bill was first introduced by the NDP, calling the proposed legislation “disappointing.”
