Alberta recommends removing auto insurance rate cap

By: 600011 On: Oct 22, 2024, 7:54 AM

 

In a new report for the Insurance Bureau of Canada (IBC), University of Calgary School of Public Policy President's Fellow and economist Jack Mintz calls for the province of Alberta to remove caps on insurance premiums, lower the provincial insurance tax rate and introduce limited fault coverage. Also
, government-run non-profits, as has been done in BC, Saskatchewan, Manitoba, and Quebec.
The report also mentions against the insurance system.


 Shortly after being elected last year, the provincial government introduced changes including lowering car insurance premiums.
was promised. As early as July 2023, Premier Danielle Smith asked Affordability and Utilities Minister Nathan Neudorf to announce short- and long-term recommendations to make car insurance more affordable. Then
Four months later, Smith introduced some short-term plans, including capping a 3.7 percent rate increase on insurance for "good drivers." They also promised that long-term reforms would come in 2024.

 The province released two studies on the feasibility of adopting different insurance models in Alberta and asked Albertans to fill out an online survey about changes they would like to see in the insurance sector.


 Mintsin noted that insurance premiums have been capping high prices in the long run, primarily because insurance companies have not been able to earn sufficient profits to maintain capital investment. Which creates a lot of trouble for the industry
"The big thing is to get out of price caps and price controls," Mintz said in an interview with CBC News. According to his
IBC Vice President Aaron Sutherland agreed. Sutherland told CBC News that the only way to improve affordability for drivers is to act on the underlying cost pressures that affect insurance coverage.
 He added that trying to cap rates would put anyone at a disadvantage to save anyone.

Sutherland says premiums are driven up by higher insurance claim payouts. Legal costs have increased by 19 percent and accident benefits by 27 percent over the past two years
The increase also increases the cost of changing the vehicle.

"The situation today is that the provincial government has set the price of vehicle insurance below the cost of delivering that product," he said.
As a result, auto insurance companies lose money. Sutherland says it's also pulling more companies out of the province. Between 2013 and 2022, 10 insurance companies left the Alberta market. Three more people are hinting to go this year.
He made it clear that people are not expected to shed tears over their insurance company's finances, but Alberta drivers are affected.

In addition to eliminating the rate cap, Mintz recommends the province consider limited no-fault insurance for accidents involving minor injuries.
He said people should have a tort option to recover compensation from people who cause accidents to big things. He added that errant drivers should be held accountable for their actions.

But Halpern, a spokesperson for the FAIR Alberta advocacy group, disputed the suggestion that legal costs were the main reason for the insurance rate increase. She said there are many factors that drive up the cost of car insurance, with property damage, vehicle inflation and vehicle theft being the biggest.


They recommend the province to reduce the current four per cent insurance premium tax to at least three per cent or abolish it altogether.

Mintz stated that all the attention auto insurance gets in public policy discussions is surprising because for the average person it is only two percent of their expenses.
Mintz said he has shared his report with the province and hopes it will be considered as the government works to overhaul the car insurance system.

 A spokesman for Finance Minister Nate Horner said other reports commissioned by the province concur with many of Mintz's findings.
The conclusion is that legal costs in particular are responsible for the increase in auto insurance costs.
 A spokesman for the minister said in a statement that the auto insurance policy is currently being developed with a focus on affordability for drivers and more details will be announced later.