Do you have questions about auto insurance in Alberta? Call IBC’s Insurance Hotline at  1-844-2ask-IBC.

Frequently Asked Questions

Auto Insurance Reform

I’ve heard that insurers want a no-fault auto insurance system that will take away benefits?2020-06-11T14:55:17-04:00

IBC and its members are not advocating for a no-fault auto insurance system. We are advocating for balanced changes to the current auto insurance system that will keep auto insurance affordable while increasing choice and care for those who need it.

All the data shows that the insurance system is no longer working for Alberta’s 3 million drivers.

To learn more about what the insurance industry has recommended to the Government of Alberta, please see Driving Change: Auto Insurance That Works.

How would fewer regulations for insurers benefit consumers?2020-06-11T14:54:20-04:00

The auto insurance industry should be regulated. However, while regulations should protect consumers from risk, they should not prevent choice, innovation and change. The right regulations will allow insurers to better serve consumers by making it easier and faster to provide the products and services that consumers expect and deserve. It will lead to consumers having more choice and access to innovative products. In short, removing and updating outdated and cumbersome regulations is a win for Albertans.

Why should the government have to step in and fix the problem?2020-06-11T14:51:17-04:00

Insurers cannot fix the problem by themselves. The Alberta government regulates auto insurance, setting the rules that insurers must follow and mandating what insurers can charge. Insurers want to work with the government to create a healthy, sustainable insurance market.

Is a cash settlement the best solution for victims injured in a car accident?2020-06-11T14:54:56-04:00

For innocent victims of negligent or impaired drivers, the best solution is to get all of the medical care they need to get better. The focus should be on providing care.

What will fix the auto insurance system?2020-06-11T14:55:43-04:00

All groups need to work with the government’s expert committee on auto insurance to develop outcomes that will improve the system for Alberta’s 3 million drivers.


Auto Insurance Premiums

How are auto insurance rates set?2020-06-11T14:57:44-04:00

The Superintendent of Insurance approves rating factors that insurers may use to set their rates, such as where an individual lives and their years of driving experience, among others. In addition, the independent rate regulator, the AIRB, reviews auto insurers’ proposed rate changes, including actuarial assumptions such as projected claims cost increases, operating expenses and maximum permitted profit margins. Based on those factors, it makes a decision on insurers’ requested rate changes. AIRB full rate filing guidelines can be found here.

This process takes at least 90 days from the time an insurer submits a rate filing to when the first consumer sees the rate change.

How long does it take to get rates approved?2020-06-11T14:58:18-04:00

After making a rate change proposal, insurers must wait between 30- and 60-days before those rates are approved. After that, consumers are sent renewal notices at least a month before their new rates are proposed to come into effect. In all, it could take more than 90 days from rates being submitted to consumers seeing those rates. Rates posted today were submitted to the AIRB months ago.

What is an insurer’s market share?2020-06-11T15:01:08-04:00

This represents how much premium an insurer writes relative to the total size of the market. The higher the market share, the more policyholders the insurer serves.

What can consumers do to lower their premiums?2020-06-11T15:00:47-04:00

Alberta’s insurers agree that auto insurance should be more affordable. In the short term, to help those dealing with the COVID-19 pandemic, insurers are offering substantial consumer relief measures. In the long-term, insurers are advocating for reforms to make auto insurance more affordable.

There are also 22 insurer groups (or 46 insurers) operating in Alberta that compete for consumers’ business. Consumers should shop around – it is proven to help drivers find better rates.

Do insurance companies just file for the highest rates possible?2020-06-11T14:57:27-04:00

No. Alberta has a competitive insurance market and insurers compete for Albertans’ hard-earned premium dollars. Many insurers request less than their justified rates as a consumer focused measure or to try to increase their market share.

The AIRB also closely monitors and approves the rates insurers can charge. No insurer can increase or even decrease their rates without explicit approval from the independent AIRB.

How often do these rate filings happen?2020-06-11T14:58:42-04:00

Filings go to the AIRB on a regular basis. This could be to request a rate increase or decrease or to change how insurers calculate their rates. The AIRB typically posts approved rates on a quarterly basis, which means that some of the decisions were made up to 90 days before the posting. Filing approval decisions are made in accordance with the Automobile Insurance Premiums Regulation.

Why aren’t the rate changes communicated earlier?2020-06-11T14:59:16-04:00

The AIRB does not disclose information about rate filing decisions prematurely for competitive reasons, as it might give other companies an unfair advantage over their competitors.

What are some of the factors that go into calculating drivers’ premiums?2020-06-11T15:00:21-04:00

Auto insurance premiums are calculated using many different factors (e.g., number of years driving, claims history, traffic convictions, where the driver lives, and type of vehicle or coverage selected). Different insurers use their claims data to determine how these factors are weighed. For example, some insurers may place a larger emphasis on number of kilometres driven per year, while others place a greater emphasis prior claims history. Factors used must be authorized by the Superintendent.

Can an insurance company charge whatever it wants for premiums?2020-06-11T14:56:59-04:00

No. Auto insurance in Alberta is heavily regulated. Premium changes are approved by the independent rate regulator, the Alberta Auto Insurance Rate Board. The provincial regulator approves premiums based on data from insurers and the General Insurance Statistical Agency (GISA), which is made up of provincial insurance regulators from across Canada.

Do consumers have to stay with the same insurance provider?2020-06-11T15:01:38-04:00

No. Consumers can choose among different insurers’ pricing mechanisms and benefit options to find a policy that best suits their circumstances. In Alberta’s competitive marketplace, customers can shop around not only for the most suitable product, but also the best price.

Are insurers’ operating costs a contributing cost to premiums?2020-07-07T13:59:15-04:00

According to data from GISA, Alberta insurers’ operating expenses are in line with the rest of the country. Instead, the primary driver behind the increase in premiums is the rising costs of settling injury claims, including legal costs, after a collision. After being stable, the average bodily injury claims cost has increased by 7.7% per year, from $41,534 in 2011 to $74,946 in 2019, according to Oliver Wyman, the Alberta Automobile Insurance Rate Board’s consulting actuary.

*Sources: 2020 Oliver Wyman Annual Review Report (2015-2019 Data, page 16), 2019 Oliver Wyman Annual Review Report (2014 Data, page 14), 2018 Annual Review Report (2012-2013 Data, page 15), and 2017 Annual Review Report (2011 Data, page 24)

Are insurers making a profit from investing premiums?2020-06-11T15:02:51-04:00

Insurers generate income and ensure they have enough money to pay claims through the premiums drivers pay and investments income. With 69% of investments in low-risk bonds, insurers generally see low investment income. Investment returns in 2018 were at 2.0%*, the lowest on record, while inflation was at 1.9%.

When filing for a rate change with the Alberta Insurance Rate Board (AIRB), insurers must factor in their own expected investment return. Given today’s low interest rates, the Alberta Insurance Rate Board (AIRB) is currently using a benchmark investment return rate of 2.84%.**

*IBC 2019 Fact Book (page 14).


Bodily Injury Claims

Why are the rate increases higher than in past years?2020-07-03T18:32:07-04:00

After years of an affordable and stable auto insurance system in Alberta, claims costs relating to bodily injury claims have skyrocketed by over 80% since 2011. These costs are driving premiums up. The insurance industry wants to work with the Government of Alberta to fix the issues in the system and deliver an affordable auto insurance product over the long term.

Why do my auto insurance premiums keep going up?2020-06-11T15:15:59-04:00

There’s a big reason – and that’s the rising costs of settling injury claims after a collision. Also contributing to the rise in premiums is the increased cost of repairing cars, which now house sophisticated technology under their hoods. When all claims costs, operating expenses and premium taxes are accounted for, insurers paid out an average of $1.13 for every $1 earned in premiums between 2014 and 2018.*

*Source: GISA Exhibit AUTO9501-AB_2018 (page 23)

A recent report suggested bodily injury claims are not the main reason for increasing insurance rates. Is this true?2020-06-11T15:19:52-04:00

No, this is not accurate. There is a lot of data from experts including the independent rate regulator’s actuary, Oliver Wyman, that shows bodily injury claims have increased significantly since 2011. These increased claims costs are the primary cause of premium increases in the auto insurance system.

What do bodily injury claims have to do with my insurance rates?2020-06-11T15:20:45-04:00

The average size of a bodily injury claim has gone up by approximately 80% since 2011, which is a staggering increase. This is because claims (which involve individuals, often with the assistance of their lawyer, suing the at-fault driver to receive a settlement) are being settled for more money. As the size of claims increases, insurance rates generally go up to cover those additional costs.



What data did you use to determine how much bodily injury claims have risen?2020-07-03T18:30:56-04:00

Insurance Bureau of Canada uses third-party data that is pulled directly from a report from Oliver Wyman, Alberta’s independent rate regulator’s actuary. The report is available publicly on the Alberta Automobile Insurance Rate Board’s website.



What is The General Insurance Statistical Agency (GISA)?2020-06-15T16:39:26-04:00

Learn more about The General Insurance Statistical Agency (GISA) here.