Opinion: Alberta drivers are feeling the chill of auto insurance rate freezes [Boss Insurance]

Opinion: Alberta Drivers Are Feeling The Chill Of Auto Insurance Rate Freezes

Earlier this year, the Alberta government implemented a freeze on auto insurance rates. With few options to improve short-term rates, it was an understandable – if unfortunate – decision and a clear political winner. But what will this cost Albertans in the long run?

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We are beginning to find out.

To be clear, no insurer wants to go out of business in Alberta. They have invested heavily in our province because they believe in the Alberta advantage and recognize the key role we play in Canada’s overall growth.

But insurance companies are not immune to the effects of inflation and supply chain issues. Anyone looking for a new car or in need of a repair will tell you that the cost of repairing and replacing damaged vehicles is skyrocketing. Legal costs related to car insurance claims are also on the rise – a staggering 79% increase over the past few years. It is unbearable.

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This will surprise neither the government nor Albertans. You can’t just intervene in a market and freeze fares without affecting drivers. We need only look to the latest jurisdiction to do so – California – to see where such policies lead. By freezing insurance rates for two years, the state government forced a number of major insurers to close their offices and stop providing insurance to customers. Those that remain are struggling, and some have had to reduce the level of protection they provide to drivers in the state.

So how do you avoid following in California’s footsteps? How are we going to move forward to reduce the cost of auto insurance while ensuring the system is sustainable over the long term?

This goal is hampered by Alberta’s current one-size-fits-all approach to auto insurance, in which everyone is forced to purchase the same coverage, regardless of circumstances or personal preferences. It’s time to change that and give Alberta drivers more choice.

That’s why Alberta auto insurers — people who live and work in that province — have come forward with a proposal that would fix our outdated system and give drivers more control over what they buy. It would protect the right to sue for appropriate care and benefits after an accident. And it would double the amount of treatment and care provided if injured in a collision.

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Here’s the best part: When combined with improvements to the province’s regulatory system, as well as the elimination of hidden taxes drivers pay on their auto policies, these reforms would save Alberta drivers an average of $325 per year.

Albertans are known to be strong advocates of free markets and strong competition. Oversight is essential, but the province’s auto insurance system is over-regulated. It limits choice and undermines competition. Worse, it fills lawyers’ pockets instead of prioritizing care for victims.

We can do better. Today, there are fewer insurers operating in Alberta than in the Maritimes, despite Alberta’s considerably larger population. Now is the time to cut red tape – and politics – from the auto insurance system and create an environment that encourages insurers to enter the market, not leave it.

By doing so, we can reverse the current trend. We can increase choice and competition across the province, while improving rates for Alberta drivers.

Aaron Sutherland is Vice President of Western and Pacific Regions for the Insurance Bureau of Canada.