The AIRB regularly fields consumer calls and one of the most common questions we get is “Why did my premium go up when there was a rate pause in 2023 and the Good Driver rate cap in 2024?”
To begin answering the question it’s important to note both the rate pause and the Good Driver rate cap deal with what the AIRB can and cannot approve as part of an insurer’s rating program.
WHY IS MY PREMIUM INCREASING IF THERE WAS A RATE PAUSE LAST YEAR?
The 2023 rate pause Ministerial Order stated the AIRB could not approve a change to an insurers rating program which resulted in new increases to Albertans’ auto insurance premiums until 2024. Albertans may have still experienced a premium increase at renewal based on previously approved rate increases.
For example, if your auto insurer received approval to increase rates in November 2022 (before the rate pause), they may not have implemented the rate change until March 2023. It then takes 12 months for the rate increase to work its way through to all the insurer’s customers. If your insurance policy renews in February 2024, you would experience a previously approved increase despite the rate pause.
Premiums may also have been impacted during the rate pause if, since your last renewal you had a new at-fault claim, a new traffic violation added to your driving record, changed vehicle, and/or changed your home address.
I QUALIFY AS A GOOD DRIVER. WHY AM I NOT PROTECTED BY THE GOOD DRIVER RATE CAP?
The Good Driver rate cap, in force as of January 1, 2024, does not allow the AIRB to approve a rating program that results in an increase over CPI (3.7% for 2024) for anyone who qualifies as a Good Driver.
The Good Driver rate cap only becomes effective when the AIRB approves an insurer’s filing to implement. Insurers began filing in January 2024 and most will implement the Good Driver rate cap by late spring.
There is a period of time between approval of a rating program and implementation where good drivers may see an increase higher than 3.7%.
For example, you renew your insurance in February 2024, but your insurer does not implement the Good Driver rate cap until April 2024. You will not have Good Driver protection on your 2024 renewal.
The AIRB requires insurers to communicate directly to policyholders to explain the reason for premiums increases greater than 3.7%. It could be a matter of implementation timing, or you could fall outside the definition of Good Driver.
WHAT OTHER FACTORS COULD BE CAUSING MY PREMIUM TO INCREASE?
There are several ways your insurer’s approved rating program can impact your premium without filing for a rate increase. In the calculation of automobile premiums, insurers often use “rating factors” which experience predictable change over time by the nature of how they are calculated, specifically due to the passage of time.
Many drivers have discounts which over time decrease – such as a new business discount which your insurer offered you to attract your business. Over time the amount of this discount reduces on renewal. Another example is a claims or convictions free discount. You may have one traffic ticket and your insurer may not surcharge for one offence, but will remove your conviction free discount; this will increase your premiums.
Insurers use driver age as one measure of risk or likelihood of getting in an accident. As we age there are medical conditions which can affect driving performance, and with reduced response time older drivers are riskier from the insurer’s perspective.
Vehicle age also impacts your insurance premium. As a vehicle ages the availability of parts, cost to repair can change. Many insurers use a variable called “vehicle rate group” which considers the likelihood of a car being in an accident and the cost of repairs or value in event it is written off. Recent inflationary pressures have increased the cost of repairing what was once considered a little fender bender will result in a write-off of the vehicle. Not all vehicles depreciate at the same rate, and this can impact the premium calculated as part of the insurers approved rating program.
In Alberta’s competitive marketplace, drivers should explore their options by talking to their insurance professional about what is causing their premium change, and what they can do to lower their premiums, whether it be through shopping the auto insurance market for a better rate or reducing coverage or increasing deductibles.
The AIRB website has tools and resources to help compare insurance rates, tips to reduce your premium, and view approved changes to your insurance company’s rating program.