November 29, 2023

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Alberta’s auto insurance rates most expensive in Canada: new report

Albertans are paying the highest car insurance rates in Canada, according to a recent Ernst & Young report

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Albertans are paying the highest auto insurance rates in Canada, according to a recent Ernst & Young report.

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The report was commissioned by the Insurance Corporation of British Columbia (ICBC), a Crown corporation for that province, and released Dec. 8.

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It sampled automobile insurance rates with an effective policy date of Sept. 1, 2022, across nine provinces for 27 customer profiles, with varying driver demographics, numbers of drivers, vehicles and accident history. For all but one of these profiles, Alberta’s insurance costs were the highest.

For example, the report found a 30-year-old married man driving a 2019 Ford F-350 with one March 2021 accident on record would pay $4,791 annually in Alberta. That’s the highest in Canada, next to Nova Scotia ($3,735) and Ontario ($3,568), and well above B.C. ($2,065) and Saskatchewan ($1,417).

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The Opposition NDP decried those numbers, charging Albertans are paying more than those in other provinces for the same level of insurance coverage as affordability remains a key issue.

NDP finance critic Shannon Phillips blamed the UCP government for the rates, citing their 2019 move to scrap a rate increase cap on auto insurers that had been imposed by the previous NDP government.

“This is highway robbery, but rather than addressing it, the UCP is allowing big insurance companies to charge as much as they want,” Phillips said in a news release. She said an NDP government would freeze insurance rates.

UCP defends policy

The UCP did not address the Ernst & Young report when contacted for comment Monday.

In a statement, Finance Minister Travis Toews said the NDP’s rate cap led to increased premiums, and said his government’s actions have led to more stable auto insurance rates, touting legislation introduced in 2020.

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“As a result of our actions with Bill 41, Alberta drivers saw improvements such as stabilized rates, increased insurance options and flexibility,” Toews said. “Albertans injured in traffic accidents can now access more health professionals, like dentists and psychologists, through their insurance claim. Amounts for grief counselling, income replacement and funeral benefits are now adjusted for inflation.”

An insurance industry spokesperson dismissed the Ernst & Young report on the grounds it was commissioned by the ICBC and produced data favourable to that provincial Crown corporation.

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He questioned the methodology of the report, which did not adjust for differences in discounts, products or benefit rates across provinces, and which removed the highest and lowest quotes received in samples.

“That’s not how anyone shops around, and that’s not how any consumer makes a decision,” said Aaron Sutherland, vice-president of the Insurance Bureau of Canada.

“It’s grossly misleading, to be candid . . . It isn’t something we should be taking to inform how we’re doing in Alberta as it relates to car insurance.”

Alberta auto insurance company margins increase

The ICBC is projected to lose $298 million in the 2022–23 fiscal year, according to a quarterly financial report from the B.C. government last month. On Monday, the ICBC applied for a two-year rate freeze on basic auto insurance.

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An annual report from Alberta’s Superintendent of Insurance outlines the financial state of the auto insurance industry.

The 2021 report found Alberta’s auto insurance companies had a claim ratio — the amount they paid out in claims compared to what they collected in premiums — was 60 per cent in 2021, a significant drop from 77 per cent the year before, and 79 per cent in 2019. That means companies paid out a lower proportion of the premiums they collected than in previous years.

The superintendent’s report says insurers collected $6.1 billion in premiums and paid out $3.7 billion in claims in 2021, a $2.4-billion margin — up from the margin of $1.3 billion in 2020.

The report cautioned these data can’t be used as an indication of insurer profitability, however, because it does not account for metrics such as administration and operational expenses.

Sutherland said insurers in Alberta can’t exceed a seven per cent profit by law, and argued it’s inaccurate to view rates in the province as exorbitant.

“The idea that there’s some kind of windfall is, I think, a misinterpretation,” he said.

[email protected]

Twitter: @jasonfherring

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