2024 Alberta Auto Rate Reform
Effective January 1, 2024, the Alberta Insurance Rate Board (AIRB) announced a Ministerial Order that will introduce a rate cap on safe drivers to replace the rate pause that has been in effect since January 2023. This order will remain in force until indefinitely.
This order is intended to temporarily address the challenges customers face when it comes auto insurance affordability in Alberta.
1. How are Safe Drivers Defined?
Safe drivers are defined as those who do not have any of the following at renewal:
· At-Fault collisions in the past 6 years
· Criminal code violations in the past 4 years
· Major infractions (major convictions) in the past 3 years
· More than one minor infraction (minor conviction) in the past 3 years
Note: Photo radar tickets do not count against eligibility to be considered a Safe Driver.
2. What happens if you have less than 6 years of licensed driving experience (i.e., if you’ve only been licensed for two years, do you satisfy the no at-fault collisions in the past 6 years criteria since you technically do not have any at-fault collisions in the past 6 years)?
If all other criteria are also met, then you would be considered a Safe Driver. The definition of what makes you a Safe Driver applies regardless of the number of years of driving experience.
3. What happens if you are considered a Safe Driver?
An Alberta driver who is considered a Safe Driver will be given a limit on rate increases. The rate increase limit will be tied to the annual Alberta Consumer Price Index (i.e., cost of inflation). The current rate is 3.7%.
4. How will I know if I am considered a Safe Driver?
If you fit the criteria above, you will be considered as a Safe Driver and you will see it noted on the declaration page of your policy documents.
5. Would I qualify as a Safe Driver if I have an at-fault accident that is protected by SEF 39 Accident Forgiveness Endorsement?
No. If a driver has an at-fault accident within the last 6 years then they do not meet the criteria to be considered a safe driver. Their premium will not be capped at 3.7% for 2024.
6. Will the rate cap amount change each year?
Yes, the rate cap percentage is indexed for inflation and is directly tied to the Alberta CPI (Consumer Price Index). The rate cap is calculated each September for the following calendar year.
7. Does this mean effective January 1, 2024, all Alberta drivers insured with Allstate who qualify as a Safe Driver will get the 3.7% rate cap?
No. Customers who meet the criteria to be considered as a Safe Driver will see the 3.7% rate cap go into effect in conjunction with our next approved rate filing effective March 1, 2024, for New Business and April 1, 2024, for Renewals.
However, this rate cap does not apply to new business. So, if a driver is looking to switch insurers, they will be subjected to non-capped rates. Any changes completed mid-term, such as removing a discount, are also exempt from the Safe Driver cap.
8. What are some exceptions where the capped limit would not apply for a Safe Driver?
a) The capped limit will not apply to a customer whose risk profile has materially changed by:
· Moving to a higher risk rating territory
· Adding or substituting a vehicle
· Changes or modifications to their vehicle that changes the risk
· Adding a new driver with a risk profile that is higher than the Insured
b) The capped limit also does not apply to new business. It is only applicable for existing customers at renewal.
c) Drivers with grid-based premiums for basic auto insurance (mandatory coverages for bodily injury, property damage, and accident benefits) are also exempt (i.e., DCPD, Collision, Comprehensive, etc will be subjected to the rate cap).
d) Only applies to Private Passenger Vehicle automobile insurance policies. Motorhomes, ATV, Snowmobiles, Motorcycles, etc., are excluded.
9. What is the difference between the Rate Cap and the Rate Pause?
The rate pause set to expire on December 31, 2023, prohibits the AIRB from making any changes to the rating program that would result in a premium increase to policyholders. The new rate cap will allow the AIRB to approve changes to an insurer’s rating program but ensures that customers do not see an increase higher than Alberta’s CPI, as reported each September if they meet the “good driver” definition.
10. Will a customer be excluded from the safe driver rate cap if they make a change that results in the loss of a discount such as multi-vehicle?
The AIRB does not consider any insurer specific discounts as a measure of risk profile therefore a policy holder who is deemed a Safe Driver will be eligible for the rate cap. However, since they lost discount(s), they may see an increase in their renewal premium despite having the rate cap in place.
11. How will the rate cap affect the Drivewise program?
As mentioned above, the AIRB does not consider insurer specific discounts as a deciding factor in whether the policy holder will be deemed a good driver or not. This means customers could end up seeing a higher premium despite being a Safe Driver. A lot of new business customers who enroll in the Drivewise program would see a reduced discount in the second year.
12. How does this 3.7% rate cap apply to customers who have already been issued policy renewal documents for 2024?
Renewals that have already been issued into 2024 won’t be re-issued with the 3.7% cap applied to Safe Drivers. This rate cap limit also does not apply to customers who will be seeing future rate increases that have already been approved and will come into effect sometime in quarter one of 2024.