Why Alberta car insurance rates are going up and how to stop it

Many drivers across Alberta are renewing their auto insurance this year, only to find they’re being dealt higher bills than in previous years.

We spoke to Matt Hands, VP of Insurance at RateHub.ca, who explained that several factors are contributing to the increase, including changes to the rate cap, a rising number of claims, severe weather events, and post-pandemic inflation.

Last year, the Alberta government announced its “good driver” rate cap would be raised to 7.5 per cent in January 2025, allowing insurance companies to implement higher rates upon renewal.

“So right away, even if you’re a good driver, your percentage increase, or price increase, could go up,” Hands said.

Hands explained that after years of a much lower insurance rate cap, insurers are now working to recoup their costs.

“The problem is the insurance companies essentially feel like they’re underwater in the Alberta market. That their pricing model isn’t in line with what they’re paying in terms of claims costs and the general cost to run the business in the market.”

The staggering amount of severe weather events we experience in Alberta, such as the costly Calgary hailstorm, which Hands said are only increasing in frequency.

“The more common they become, the more that we’re rebuilding and replacing, and the cost of rebuilding and replacing homes and vehicles is more expensive today than it was four or five years ago, and that’s just the reality of inflation of the market and just the cost of goods.”

Essentially, insurance providers are trying to play catch-up. Rate increases reflect losses from previous years, as there is a time lag between when prices are approved and when insurers adjust to sustained losses.

Healthcare costs related to auto accident claims have also risen, further inflating premiums across the province. Hands also pointed to legal fees as a potential source of inflated insurance premiums.

“In a no-fault system, basically everything is run through the insurance companies directly, where Alberta has the ability to sue if there’s an accident.”

“[The province] feels like some of these legal costs are actually inflating the cost of insurance in the market.”

Alberta’s government is looking to transition to a no-fault system by 2027, which could help alleviate these expenses.

Additionally, Hands noted the province’s insurance tax is cited as another contributing factor to rising premiums.

How to reduce your premium

With premiums climbing, Hands explained that it’s crucial for drivers to shop around and compare quotes from different insurers. Each company uses a unique rating model, meaning a previously competitive rate may no longer be the best option at renewal time.

Increasing your deductible may reduce premiums, but it also means paying more out-of-pocket in case of a claim.

Bundling policies like combining home and auto insurance with the same provider can lead to savings. Maintaining a clean driving record, installing winter tires, and using anti-theft devices can also make drivers eligible for discounts.