Alberta auto insurance crisis made worse with record-breaking hailstorm

The mounting costs of Alberta’s auto insurance

Alberta's auto insurance system is facing significant cost pressures, all of which are growing well in excess of the government's 3.7% rate cap. Over the past two years:

• Legal costs have grown a projected 19%
• The cost of delivering care and recovery benefits to those injured in a collision is up about 27%
• The cost of new and used replacement vehicles has grown 27% and 9%, respectively
• The cost of auto theft is up 55%
• The Alberta government's health levy on auto insurers is up 60%

According to the IBC, auto insurers had already paid out more in claims and expenses in 2024 prior to the hailstorm than they have received in premiums.

Furthermore, insurance premiums have risen 12% over the past two years despite government rate interventions.

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Alberta auto insurance and the rate cap

In 2024, following a year-long "rate pause," the Alberta government implemented a 3.7% cap on auto insurance rate increases for those it defined as "good drivers." This was announced as a short-term measure while the government explores reform options to improve affordability.

"[A] handful of insurers have left over the past five years. We believe that others may follow. Even those who do not have plans to withdraw from the market per se may be implementing cost savings measures that are reducing the accessibility and availability of auto insurance, given the lower relative profitability of the Alberta auto product and its uncertain future,” credit rating agency Morningstar DBRS stated in a press release back in July.

Additionally, IBC is also sounding the alarm about how this rate cap is doing more harm than good.

"We've seen this time and time again: Rate caps simply don't work and ultimately hurt drivers," Sutherland said.

"Premiums have continued to climb and the availability of coverage has diminished. No business can operate when the product they sell costs more than the price they are allowed to charge for it. It's time that Alberta's rate cap is removed."

Alberta has experienced a number of major hailstorms since 2020, with insured damage now exceeding $5.4 billion, including $1.54 billion in damage to vehicles.