Fact Check

Fact Check: Flawed methodology used in ICBC auto insurance report 

On December 8, the Insurance Corporation of British Columbia (ICBC) released findings from a new report by Ernst & Young (EY) that suggests that BC drivers pay among the lowest auto insurance rates in the country, and Alberta drivers pay among the highest rates. It should be noted that the report was commissioned by the Crown insurer.

As set out below, the methodology used in this report is problematic, raising serious questions about the validity of its findings. The report presents a skewed picture of what drivers pay for auto insurance across the country – and in Alberta, specifically.

On January 23, EY issued a press release stating that while its report for ICBC has been publicly referenced in discussions on provincial rate comparisons, it was not the intent of this comparison. Further, it was acknowledged that the comparisons made in the data summary do not attempt to provide a full representation of the rate options available or what consumers are paying.

Ultimately, the report’s distorted view of competitive markets is problematic for consumers and the governments that want to improve their province’s auto insurance system.

Here are six key problems with the methodology used in the report:

  1. EY did not present the lowest quote a driver would receive in a province with a competitive auto insurance market. Instead, EY deleted the lowest price received on a quote and presented an average that skews higher and is not an accurate reflection of the actual average premium.
  2. EY did not account for significant differences in coverage levels between BC and Alberta auto insurance. Under the Crown insurer’s no-fault insurance model, there are strict limits on recovery benefits and no ability for drivers to seek legal recourse for additional compensation. This is vastly different from the Alberta auto insurance market, where drivers can sue for additional recovery benefits.
  3. EY declined all discounts offered on the quotes that insurers offer in a competitive market. In a competitive marketplace, private insurers offer aggressive pricing and discounts. For example, many insurers will offer discounts of up to 20% for bundling home and auto insurance, driver training certificates and insuring multiple vehicles. They also offer group discounts for members of specific professions, unions and associations. BC’s public insurer does not offer similar discounts because it does not have to compete for business.
  4. The General Insurance Statistical Agency (GISA) is the statistical agency for nine participating insurance regulatory authorities across Canada with respect to auto insurance premium and claims data. GISA’s data was not utilized in this report and, therefore, EY’s findings cannot be validated.
  5. The Alberta quotes were generated through an online quoting portal. EY did not give licensed insurance brokers the opportunity to “shop the business” and present additional, more affordable quotes.
  6. Notably, New Brunswick and Quebec, which have lower average premiums than BC, were completely excluded from the report.

Auto insurance systems are complex, and more can be done to improve them for drivers. But, such discussions should be based on facts rather than reports with misleading findings based on problematic methodology such as this one, which ultimately does more harm than good.

Fact Check: What Does Direct Compensation for Property Damage (DCPD) Mean for Alberta Drivers?

On January 1, 2022, Alberta adopted a Direct Compensation for Property Damage (DCPD) system – which will improve the way Alberta’s insurers support their customers following collisions.

Under DCPD, your own insurance company pays for repairs to your vehicle when you are not at-fault for a collision, not someone else’s. It’s a fairer and more customer-focused approach to insurance claims and vehicle repairs.

Not only does DCPD better align insurance premiums with the costs associated with repairs for a vehicle, but it means damages to your vehicle will be repaired faster and without the complications that can arise when dealing with another driver’s insurer. And, for the majority of drivers, DCPD will either reduce their premiums or they will see no change at all.

To learn more about DCPD and how it will impact auto insurance premiums, please visit www.ibc.ca/ab/auto/dcpd.

You can also contact your insurance representative or IBC’s Consumer Information Centre at 1-844-2ask-IBC or AskIBCWest@ibc.ca if you have questions about what DCPD means for you.

Updated April 7, 2022

Fact Check: How are auto insurance rates approved in Alberta?

Alberta has a competitive and highly-regulated auto insurance market, which serves to strike the right balance in ensuring fairness and affordability for drivers. While insurers must earn your business by offering competitive rates and innovative products, the Alberta Auto Insurance Rate Board (AIRB) has the final word on any rate changes submitted by insurers.

If you’ve ever wondered how auto insurance rates are approved, we’ve put together a brief outline of the process below.

Setting rates

Rating criteria: Any data that is factored into calculating insurance rates – from where a driver lives to years of driving experience – must first be approved for use by the Alberta Superintendent of Insurance. Insurers are not allowed to include a factor without permission from the Superintendent.

Approving the rate change: Insurers must submit proposed rate changes (both increases or decreases) to the AIRB. The Rate board reviews auto insurers’ proposed rate changes and evaluates each request. The AIRB then makes a decision based on actuarial assumptions, which includes projected claims cost increases, operating expenses and maximum permitted profit margins.

Data used by the AIRB comes from insurers and the General Insurance Statistical Agency (GISA), which is made up of provincial insurance regulators from across Canada.

You can learn more about AIRB’s filing guidelines here.

How often do rate filings happen? How long does it take for rates to get approved?

Insurers submit filings to the AIRB regularly. Requests could be requests for:

  • a rate increase
  • a rate decrease or
  • to change how an insurer calculates their rates.

The AIRB has a web page to report on approved filing decisions as they are implemented as well as a Comparative Rating Tool that provides a comparison of rates for Alberta insurance companies.

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

Drivers will receive a renewal notice at least a month before any new rates are proposed to come into effect.

Updated August 9, 2021

Fact Check: Top 10 Tips to Drive Down Your Auto Insurance Rates

Auto insurance rates are determined by a number of factors, such as your driving record, where you live, and the type of car you drive. However, there are things you can do to manage your premiums and even lower them by making informed decisions and exploring options available to them.

Check out our Top 10 list of ways you can take control of your auto insurance premiums. Don’t hesitate to call the IBC Insurance Helpline at 1-844-2ask-IBC (1-844-227-5422) if you have any questions.

Updated July 13, 2021

Fact Check: How auto insurance premiums are calculated

The Alberta government has taken steps to improve our auto insurance system by increasing benefits for those injured in a collision, changing the Minor Injury Regulation and eliminating plenty of the system’s red tape, but there’s still work to be done. While our industry and other stakeholders work with government to continue improving the auto insurance system, there are actions Albertans can take right now to potentially reduce the amount they pay for insurance.

The first step is understanding the many factors that are used to determine auto insurance premiums. Knowing how the insurance industry calculates this figure can help you take more control over your insurance costs.

What Factors Contribute To Auto Insurance Premiums? 

Insurers can only use government approved factors to determine your premium. These include your driving history, your age, where you live, how often you drive and what kind of car you drive. Insurance companies do not use race, income, occupation or employment history. It is not only against the law but more importantly, it’s not how we do business.

Let’s look more closely at some of the key factors used to determine insurance premiums:

The make and model of the car you drive is very important in setting your premiums. Buying or leasing a car with a lower-cost insurance rating can help to manage costs. You can also look at a vehicle’s safety rating by the Insurance Institute for Highway Safety as another way to potentially reduce your costs. Insurers also use a system called the Canadian Loss Experience Automobile Rating (CLEAR) to determine how likely it is that your vehicle will be involved in a claim and what that will cost. If you choose a car with a lower claims risk and CLEAR number, you can expect a lower premium.

Where you live is another factor in determining premiums. Why? Because the number of accidents that happen in congested, high population density neighbourhoods in cities like Calgary or Edmonton is higher than in sparsely populated, rural areas.

Your driving record is another key factor in how insurance companies calculate premiums. Licence suspensions, impaired driving and other convictions for driving offenses all add up to higher insurance premiums. The best way to keep costs down? Be a safe driver. By building a consistent, accident- and conviction-free driving record you can help reduce your costs.

The insurance industry is also advocating for increased use of telematics in Alberta. Telematics, or usage-based insurance (UBI), uses a smartphone app to record your driving activity. Insurers use this information to personalize your insurance premium. In other words, good drivers are rewarded.

We’ve put together a video that talks more about how premiums are calculated. You can also learn more about how to manage your premiums here and here.

Updated February 16, 2021