Blog, Motor Vehicle Accidents

New Report Finds Needless Auto Insurance Hikes In Alberta

Written on behalf of Cuming & Gillespie LLP Published on January 30, 2020
A view of a road at dusk from the interior of a car through the windshield

By now we have all heard, or have experienced firsthand, that Alberta drivers are facing higher auto insurance rates.  The insurance companies blame the rising insurance rates on increasing claims and expense costs that are exceeding the premiums. 

Fair Alberta Injury Regulations (“FAIR”), an Alberta group advocating for fair auto insurance, has recently released a report that has found that the assertions by some the insurance companies that the industry is in crisis due to a reported rise in bodily injury claim costs are incorrect. 

Recent History of Rate Caps on Insurance in Alberta

In 2017, the NDP government placed a 5 percent cap on insurance rate hikes to address the insurance rising costs in the auto industry.  When the United Conservative Party came into power in Alberta, the provincial rate cap was allowed to expire in September 2019 with the new government granting the Automobile Insurance Rate Board (AIRB) the authority over auto insurance rates.

Less than six months after the Alberta government removed the rate cap on auto insurance policies, the United Conservative government has announced that it is creating a panel to review the rising insurance rates.  According to Finance Minister Travis Toews, the rate cap on insurance is just a “band-aid” approach.  Toews stated,

“A three-person committee will look at what’s working and what’s not in our current automobile insurance system.  They will look to find solutions that make sense for Albertans.”  

The panel will provide its recommendations by the spring of 2020. 

The AIRB reports that 92 percent of insurance companies that insure private passenger vehicles have asked the board for a rate hike and 27 insurers in Alberta have recently been grated rate hikes between less than one percent to almost 30 percent for basic coverage on private passenger vehicles.   

What Is the Automobile Insurance Rate Board?

The Automobile Insurance Rate Board, otherwise known as AIRB, is the regulatory board responsible for monitoring and adjusting the cost of auto insurance in Alberta.  The board was established by the Minister of Finance and Alberta’s provincial government. 

AIRB’s mandate is to ensure that the interests of Alberta’s residents, businesses and the government are being served in relation to automobile insurance.

How Are Auto Insurance Rate Increases Determined?

AIRB reviews auto insurance rates each year in Alberta.  The following are factors that are considered by AIRB:

  • The strength and profitability of the insurance industry in a given year;
  • The importance of providing rates to the public that are fair and stable;
  • The projected stability of auto insurance rates over the next 3-5 years;
  • The strength of the Canadian dollar;
  • The cost of the average auto insurance claim payout;
  • The number of fraudulent insurance claims in a given year; and
  • The frequency and severity of natural disasters within the province.

What Is FAIR and What Did FAIR’s Recent Report Reveal?

FAIR is a coalition of Albertans that includes consumers, medical professionals, injured Albertans and members of the legal community that are dedicated to protecting the rights of those injured in motor vehicle accidents. FAIR is committed to holding auto insurance companies accountable and ensuring that injured Albertans are receiving sufficient compensation and appropriate treatment options for their injuries. FAIR advocates directly to the government to provide an opposing position to those that speak on behalf of the insurance industry.

As insurers maintain that increasing injury payouts are creating a “crisis” in the automobile insurance industry as companies are paying out more than they are bringing in through premiums, FAIR retained the services of an actuary to study data released by AIRB and industry statistics from the General Insurance Statistical Agency. 

A report prepared by Craig A. Allen (“Allen”), a Canadian consulting actuary based in New York, indicates that the AIRB overestimated the severity of bodily claims reported in its 2018 annual report.  Allen does recognize that injury claims rose between 2011 and 2016 but has reviewed all of the data and maintains that injury claims have levelled off since then. 

According to Allen, the rate cap was high enough to cover injury claims in the last few years as the AIRB rate hikes accounted for claims increasing at a faster pace than they actually did. Allen wrote:

Allowable rate levels since late 2017 … provide more than adequate amounts for the estimated bodily injury claims costs that have subsequently emerged. For insurers that have kept up to date with their rate changes, further rate increases for bodily injury coverage appear to be unnecessary at present and for a period into the future.

Allen’s report indicates that the AIRB overestimated the severity of claims in its 2018 annual report and has revised these figures to lower amounts.

FAIR maintains that insurers are hoping to change insurance laws and increase their profits, and in doing so reduce consumer rights and protections. 

FAIR contends that insurers are attempting to influence the government to change the definition of “Minor Injury” in the auto insurance regulations. Changes of this nature would benefit the insurer by allowing the insurer not to compensate an individual injured in an accident in Alberta.

According to a FAIR spokesperson:

All this time, insurance companies have been blaming Albertans who have been injured in accidents for rising premiums, but now we have data that says that’s not true.  This report raises a lot of questions.  We now know injuries aren’t driving insurance rates.  We also know many insurers in Alberta are still making tens of millions in profit each year.  Consumers deserve answers to these questions.  We should know if we all are being asked to bailout insurance companies who have simply made bad bets or made some poor business decisions.

Choosing a personal injury lawyer to represent you or a loved one in your time of need is not a decision to be taken lightly. As a firm of lawyers who specialize in personal injury law and medical malpractice, the experienced lawyers at Cuming & Gillespie Lawyers have a strong reputation in the community and in the legal profession. 

At Cuming & Gillespie LLP, we strive to provide our clients with excellent legal services, and we offer a free consultation. Our personal injury lawyers are happy to answer any questions you may have regarding hiring a lawyer for your personal injury or medical malpractice case. Please contact our office at 403-571-0555 or online.