The excerpted article was written by ANNA JUNKER
Alberta drivers could possibly see hikes of 12 per cent or higher to their auto insurance rates in the new year, after a cap that kept them artificially dampened was terminated by the province this year.
The insurance industry, and Premier Jason Kenney, said Friday there has been trouble in the industry over the recent years as payouts exceeded money brought in through premiums.
The possible increases come after the province decided not to renew the five per cent cap on rates the previous NDP government put in place in 2017. The Automobile Insurance Rate Board (AIRB), an independent regulatory body, will now be responsible for approving insurance rate hikes.
Kenney said Friday insurance companies were losing money in Alberta due to the cap.
“Part of this is because we were facing the prospect of bankruptcies in the industry, leading to less competition which would ultimately be really bad for consumers,” Kenney said
“I understand one of the reasons why the industry has been losing money, paying out more in benefits than receiving in premiums.”
That sentiment is echoed by the Insurance Bureau of Canada’s Western vice-president Celyeste Power.
“Unfortunately, premiums have been increasing for the past four years. The rate cap, while I think it tended to try to push rates down the road and not increase rates, (it) did not lead to actually any decreased rates, some people still saw rate increases under the rate cap of 30, 40 per cent.”
A silver lining to the situation, Power said, is Alberta’s competitive market.
“Not all insurers are in the exact same position. Not all insurers are going in for the same amount of rate change. So it’s a competitive market,” said Power.
“That’s key for consumers to shop around to find the right product that meets their budget needs.”
But it’s unclear right now just how much the rates will increase until the AIRB releases those numbers.
“A lot of companies are in different positions and so they’re not only just looking at the markets differently, and all in their own unique competitive way, but they also look at each consumer differently,” said Power.
“There’s a variety of factors that go into coming up with a premium for each individual.
“Ultimately, when claims increase and no fixes are made, premiums then will follow.”
12 per cent is the ‘average’
However, George Hodgson, CEO of the Insurance Brokers Association of Alberta said on average, companies were losing about 12 cents on every dollar they were bringing in.
“You can expect that the average rate increase would be somewhere north of that 12 per cent in order to bring the industry back to profitability,” said Hodgson.
“That’s an average. In some cases, it might be less, it might be zero. In other cases, it might actually be a fair bit more than 12 per cent.”
Kenney added personal injury claims have been “growing massively,” contributing to higher premium costs.
“Lawyers have found loopholes through the restrictions on personal injury awards that were established by the Klein government,” Kenney said.
“Those restrictions brought control to the cost of insurance in Alberta but now, as I understand it, personal injury awards have been growing massively, year after year after year and that’s ultimately what’s forcing up premium costs.”
Kenney said his government will be looking into closing those loopholes.
“How can we frankly close legal loopholes that have created this huge and unacceptable cost inflation for insurance.”
Rate increases ‘unfair’: NDP
NDP MLA Sarah Hoffman said in response to Kenney’s comments that the rate increases wouldn’t be fair to consumers.
“I think it’s really disrespectful to people paying insurance to say well, we just need to do this otherwise companies are going to leave,” Hoffman said.
She added the same concerns from the insurance industry were brought up when the NDP were in government.
“I get it, their job is to fight for their profit margins, our job as elected officials is to fight for ordinary folks and make sure we have a fair system and a five per cent cap seemed fair, and they stayed.”
Power said the key for consumers will be to shop around and ask questions.
“Ask about bundling, ask about increasing your deductible. Look at dropping collision coverage if you have an older vehicle,” Power said.
“Ask about usage-based insurance, I call it Fitbit for your car, which essentially gives you a discount for good driving behaviour. All of these questions are good to ask and finding that right product and finding that right price to meet your needs.”