Alberta Looking at Legislating Changes to Auto Insurance Regulations

According to Doug Horner, the Alberta Minister of Finance, consumers are demanding reforms to auto insurance rates.

The province has drafted Bill 39, the Enhancing Consumer Protection in Auto Insurance Act, to allow premiums to be regulated by the Alberta Automobile Insurance Rate Board.

The aim of the bill is to keep auto insurance premiums from skyrocketing with regulation, but also to increase competition in the market by allowing insurers to file for rate changes individually on an as-needed basis instead of the current annual industry-wide adjustment to rates.

The Pitfalls of Regulation

While Alberta is trying to meet calls for decreased premiums from consumers, the added regulation may actually hurt the industry, according to Derek Fildebrant, the Alberta director of the Canadian Taxpayers Federation.

“When the government tries to keep prices down artificially in one area, premiums might go up in another area. One group of drivers will have to pay eventually, and we don’t know which demographic that will be.”
Derek Fildebrant

Basically, if insurers are forced to keep premiums down in one area, and are free to make increases in others, some drivers may find themselves paying more for their insurance. At this time it is impossible to say which group of drivers would be most affected by the Act.

The Benefits of Increased Competition

The silver lining for insurers is the ability to put forward rate changes for approval right away, rather than having to wait as they currently do for an annual industry-wide bump in rates. This allows insurers to use their own company numbers rather than submitting to an industry-wide agreement on what increases –or decreases - should be. The Alberta government is hoping this will mean rates that are more fine-tuned to Albertans rather than Canadian drivers as a whole.

It will also mean that if insurers see a big bump in claims in a particular area or driver demographic, they are free to ask for increases to policies coming up for renewal rather than waiting for year end, which could end up costing consumers more. The hope is that insurance companies won’t do this in order to be competitive in the marketplace, but the reality remains to be seen. The underlying thought is that competitive insurers won’t put through claim increases in order to avoid driving their customers away to other insurers, but if all insurers notice an uptick in a particular area, they’re likely to all put through requests for rate increases.

Is it Just Too Much Regulation?

At this point, it remains to be seen if Bill 39 is too much regulation or just enough. It does allow insurers to build their rates based more on what is happening in Alberta than the rest of Canada, which is good news for consumers. Except for major urban centres like Calgary and Edmonton, Albertan auto insurance rates are low when compared to the rest of Canada. And the ability to decrease or increase rates on the fly is good news for insurers who want to be more competitive with their rates. However, any time the government gets involved in private industry, you can expect a certain amount of turmoil and dissent, which may or may not end up benefiting consumers. As Fildebrant puts it: “We’d all be better off just getting bureaucrats out of the business of insurance.” And as the leader of a consumer-focused organization like the Canadian Taxpayers Federation, that opinion is worth listening to.

If you are one of the Alberta consumers who is concerned about their auto insurance rates, get in touch with us.

As insurance brokers, we actively shop for the best policy for your needs and can find a package that does more for you. We would love to work with you, check out our insurance page for more information.