As the 5% rate increase cap imposed by the previous government expires, drivers are likely to see a substantial increase in their premiums. Here’s why the increase is happening and what it means for consumers.
An Unsustainable Cap
Insurers have a good reason to increase their rates. The cost of bodily injury claims is increasing because some injuries are no longer covered under the cap. As a result, insurers are settling claims higher than when auto reform was first introduced in 2004.
The average cost of repairs is also increasing due to all the technology that are now standard equipment on vehicles like sensors and back up cameras.
The Increasing Cost of Claims
In the last 5 years, 61% of all insured losses across Canada have been paid out in Alberta. Here is a list of the last 5 catastrophic losses in Canada and how much were paid out:
- Fort McMurray Fires: over $3.5 billion
- Alberta Floods in 2013: over $1.5 billion
- Toronto Floods in 2013: over $900 million
- Slave Lake Fires in 2011: over $700 million
- Alberta Hailstorm in 2014: over $500 million
Ultimately, insurance companies need to be able to cover the cost of all claims. With the 5% rate increase cap lifted, consumers should expect their premiums to go up anywhere between 10% to 30%,, depending on the company.
What can you do to decrease your rate?
There are many factors that influence your insurance rate. Some of these include where you live, the type of vehicle you drive, traffic violations and how many years you have had continuous insurance. Some things you can do to reduce your insurance premium is increasing your deductible and bundling your home and auto insurance policies.
Speak With an Insurance Broker in Edmonton
Finding coverage that works for you and your budget can be difficult, but remember that insurance brokers work for you and not the insurance company. At MBS Insurance Brokers Ltd., we can help you navigate the recent changes to Alberta’s insurance industry. Contact us today to make an appointment or to learn more about the policies we carry.