Fate of NDP-imposed cap on auto insurance still unknown

An order to cap rate hikes on auto insurance in Albertaestablished by the previous NDP government is set to expire in two weeks, but there's no word from the UCP on what will happen to the directive.

The government is "aware of the timeline on the five-per-cent rate cap and [is] currently considering all options," stated an email from the Treasury Board and Finance Ministry to CBC News on Thursday.

The cap, which is set to expire Aug.31, has been in place since 2017. It has been widely criticized by the insurance industry for stifling consumer choice and not putting a dent in overall rate increases.

The limit means each insurance company can't exceed an average of a five-per-cent increase across their entire business so some drivers might see more than a five-per-cent increase, and some might see less.

No dent in rising rates

Celyeste Power, vice-president of the western region for the Insurance Bureau of Canada, said the cap on auto insurancehikes has not protected consumers.

Data from the insurance bureaushows the average cost of auto insurance in Alberta hasrisen about five per cent between 2017 and 2018, from $1,251 to $1,316.

"It hasn't done anything to protect consumers. Instead, it has taken away availability for consumers. Webelieve good public policy would be to fix the underlying cause of the problem," Power said.

"Rising claims costs with regards to bodily injury is the number one source of increasing costs within the Alberta auto insurance system."

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George Hodgson, CEO of the Insurance Brokers Association of Alberta, said rising rates are not unique to Alberta.

Insurers in all provinces are dealing with the rising cost of repairing vehiclesand increasing bodily injury claims. The five-per-cent cap has added another layer to that trend.

"It's resulted to a certain extent in good drivers subsidizing poor drivers," he said.

"It has resulted in companies doing things they wouldn't otherwise have done, like limiting or cancelling monthly payment options for some people or not offering [optional] coverage to some people."

Need for more personalized insurance

The cost-comparing site LowestRates.ca says auto insurance premiums have risen 16 per cent in Alberta this year compared to last. The site gathers data from30 insurance providers in Canada.

The company's CEO, Justin Thouin, said some insurance companies are leaving Alberta if they can't afford to make a profit, leaving the market dominated by companies charging higher rates.

Thouin says there needs to be fundamental changes to the vehicle insurance industry.

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"Insurance should be more personalized. Drivers should be able to choose certain coverage and not choose others, which would allow insurance companies to charge less for certain people," he told CBC's Edmonton AM on Thursday.

"There's lots of things that should be done but a five-per-cent hike limit is not one of them."