The car insurance industry has made headlines more than a few times recently. One article warns of the “bumpy road ahead” for drivers in Alberta while another explains what makes up your insurance bill and why rates go up even if you don’t have a claim. Did your Alberta auto insurance premiums go up this year? It can be frustrating to see price increases, especially if you haven’t had a claim. This article will explain what’s going on with car insurance in Alberta, why your rates are going up, and how to minimize the impact for yourself and your family.
What Impacts Your Car Insurance Rates
First, it’s important to understand what factors affect your car insurance premiums. This includes:
- Your claims and insurance history
- Your driving record (tickets and accidents)
- Your deductible
- Your coverage options
- The year, make and model of the car you drive (for theft risk and repair costs)
- The value of your vehicle (MRSP and current market price)
- Your location (weather, crime rate, accident frequency)
- Your demographics (risk statistics)
- Your driving habits including where and when you drive
The Alberta Car Insurance Industry in Turmoil
Over the past several years Alberta has seen a rising number of claims and the cost of each individual claim has also gone up especially with those involving minor injuries. Claims are more frequent as accidents are happening more often largely thanks to distracted driving. Vehicles also cost more than ever to repair due to the increasing use of technology more expensive materials and the high price of labour to fix them.
The Government of Alberta limited the payout for minor injury claims which helped reduce certain claim costs. However, they also implemented a 5% cumulative premium increase cap and set the price for liability-only car insurance. This meant insurers could not appropriately price their insurance products for the risks.
Update September 2019: This rate cap has been removed which means insurance companies will likely be increasing their rates more than 5%. Talk to your broker if you’re unhappy – we work with a number of different insurance companies and can find you the cheapest car insurance rates in Alberta!
Update January 2022: The Government of Alberta has introduced Direct Compensation for Property Damage coverage, mandatory on all auto insurance policies. This is an attempt to simplify the claims process and lower costs. For more information, check out our article on DCPD coverage.
Insurance fraud is also an issue. Aviva Canada claims car insurance fraud costs Canadians over $2 billion per year. In some cases of insurance fraud, the insured is an active participant and at other times they are an innocent bystander. Regardless, this is a contributing factor to rising rates.
What Insurance Companies Are Doing in Alberta
The number of claims cost of claims government regulations and insurance fraud has all come together to create a crisis for car insurance in Alberta. Insurers are experiencing significant losses which have pushed them to do the following:
- Reduce payment options
- Remove discounts
- Increase prices for optional coverage
- Cancel brokerages to reduce risks in Alberta
- Pull out of the province entirely
Why should you care about an insurance company’s profitability especially when your rates are going up? In addition to having a more difficult renewal and application process, you’ll also experience fewer payment options. For example, you may be required to pay your full premium upfront instead of through monthly payments. You may also have fewer coverage options.
What can you do?
You will likely still be impacted as a consumer but there are a number of things you can do to keep your rates as low as possible and ensure you’re getting the best coverage for the best price you can. Here are a few ways you can minimize the impact on yourself and your family:
- Stay insured as gaps in your insurance history will raise your rates.
- Don’t hop around insurance companies unless it’s truly worthwhile (the new business discount is transforming into a loyalty discount throughout the industry).
- Avoid submitting claims for damage you can afford to fix.
- Be aware of insurance fraud and scams.
- Pay your insurance on time.
- Bundle your insurance with one company for discounts.
- Practice safe driving habits – be courteous, know and follow the rules of the road, leave adequate following distance and don’t drive distracted!
- Invest in winter tires for the colder months.
- Consider using public transit for your commute if possible.
- Review your insurance coverage with your broker at least annually.
Your broker understands what’s going on and how to find the best insurance for your needs and budget. They can advise you on your options if you need to cut costs.