Premier Danielle Smith said Friday that she is not worried that more auto insurance companies will flee the province, but added her government will “revisit” compensation reforms that were introduced in 2022.
Earlier this month, finance ministry officials confirmed to Postmedia that one insurance provider had notified the superintendent of insurance that it was withdrawing from the province effective November 2023, citing the government’s rate freeze.
Confidentiality rules prevent the ministry from naming the company, which has a market share of less than 0.5 per cent of Alberta’s auto insurance policies.
The company’s coming departure means more than 16,000 drivers will need to get new policies.
But Smith said Friday she was skeptical that other insurers would similarly leave Alberta.
“I’ll believe it when I see it,” she said. “There’s obviously a lucrative market here, because we’re one of the few markets that operate in a free enterprise system. And so I think we want to work collaboratively to make sure that it’s still a competitive market.”
The province implemented a freeze on insurance rates for private passenger vehicles last January, with no rate increases being approved for the remainder of the year.
But many drivers saw their rates increase anyway due to prior approved rate changes, updated driving records and tickets as well as changes to home address or insured vehicle type.
Speaking Friday, Smith didn’t rule out future government action on Alberta’s insurance rates where were found to be the highest in the country, according to a December Ernst & Young report commissioned by the Insurance Corporation of British Columbia
“Because it’s a mandated product, you bet the government has a role in making sure that those prices are reasonable,” Smith said.
“People expect that if they have a clean driving record, no accidents, and no speeding tickets, that the rates are gonna keep going down. That’s what people expect. That’s how insurance is supposed to work. And that’s not what’s happened.”
A series of overhauls to insurance rules took effect in January 2022. The change introduced direct compensation for property damage (DCPD), where drivers deal with their own insurance company for damage to their own vehicle in the event of a collision where they are not at fault.
Smith suggested Friday that her government could look at that system again.
“If you drive a very expensive car, and somebody rear-ends you, then you pay for the repair of your own vehicle. That’s why a lot of people saw their prices go up,” she said.
“I think we have to revisit that policy.”
Alberta Finance Minister Nate Horner told Postmedia earlier this month the freeze is keeping rates down for now but isn’t a long-term solution for insurance companies.
“We know the pause is doing, what caps and pauses do. It’s preventing an uptick in rates,” Horner said.
“But I would say that it’s something that we can’t leave on forever. It was meant to be a short-term affordability measure, right at the peak of the affordability crisis.”
Increases to auto insurance rates were capped at five per cent from 2017 until September 2019 under an NDP regulation.
Then-premier Jason Kenney removed the cap saying it was causing insurance companies to lose money, even pushing some to the brink of bankruptcy.
In a statement, NDP finance critic Shannon Phillips said the cap afforded Albertans price protection they don’t enjoy under current insurance rules.
“The UCP removed that protection as a favour to their friends in the insurance industry. Now Alberta drivers pay more for insurance than any other Canadians.”
— With files from Jason Herring and Lisa Johnson