The Alberta government has announced an interim measure to cap auto insurance rates for “good drivers.”
This measure offers protection against potential rate increases for responsible motorists and serves as a temporary solution while the province awaits a comprehensive report to inform broader auto insurance reforms.
While announcing the measures, Minister of Finance Nate Horner explained that the auto insurance industry has built up pressure from the pause on rate increases implemented over the last year. The cap on insurance rates for “good drivers” will commence immediately after the current pause is lifted at the end of 2023.
“This is a short-term solution to ensure that especially Alberta’s good drivers see rate protection,” said Horner.
The cap, while effective immediately after the pause is lifted, is not seen as a sustainable solution but rather a buffer against potential spikes in insurance rates for select drivers.
Echoing this sentiment, Premier Danielle Smith emphasized the importance of providing immediate relief.
“We understand the financial pressures faced by Albertans, and this measure is a testament to our commitment to support them through these challenging times,” she said.
As for the long-term solutions, nothing in the package addresses the costs associated with auto insurance. The Alberta government has commissioned an independent report on the state of the industry that it expects to receive in early 2024, which will help them address how to approach the long-term issues surrounding car insurance.
The criteria for what constitutes a “good driver,” a central aspect of this temporary policy, was developed in collaboration with the rate board.
Horner explained the criteria for a “good driver” is someone who has not had one or more at-fault accidents in the last six years. Further qualifications include a record free of Criminal Code traffic convictions during the previous four years, such as driving under the influence. Additionally, a “good driver” should not have had any major traffic convictions in the previous three years. These encompass violations like speeding in a school zone. Finally, the definition permits no more than one minor traffic conviction, such as minor speeding tickets, in the same three-year period.
“We worked with the rate board to come up with this definition of a good driver,” Horner explained.
Some criticized the scope of the cap saying that it is too narrowly focused and excludes new drivers, those switching companies, or individuals purchasing new vehicles.
Horner explained that there is a necessity to give insurance companies places to increase rates in the system, or Alberta will start to see companies leave.
“That’s why this needs to be short-term,” he said.
Looking beyond this interim solution, the Alberta government is contemplating a comprehensive reform of the auto insurance system.
“We’re looking at the entire gamut,” said Horner.
In an unexpected move, the government has not ruled out introducing a public auto insurance system, a concept previously met with skepticism.
“I would have been very against starting new Crown corporations. But I’m doing my best to, you know, not be ideological and see what the report actually says,” said Horner.
