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Report suggesting Alberta pays most for auto insurance flawed: Insurance Bureau of Canada

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A new report that found Alberta drivers pay much more to insure their vehicles is being criticized by a national industry association for not comparing equivalent programs offered between provinces.

"It really isn't an apples-to-apples comparison," said Aaron Sutherland, vice-president western and pacific for the Insurance Bureau of Canada (IBC).

The Insurance Corporation of British Columbia (ICBC) commissioned accounting firm Ernst and Young to look into the issue and compare rates among those living throughout Canada.

The report came out with 30 customer profiles of varying ages and driving experience and determined Alberta drivers pay far above what other Canadians do to get behind the wheel.

One example from the study was an 18-year-old with two years driving experience, with a 2012 Honda Civic LX and no claims or convictions.

While that individual would pay just $1,100 in Saskatchewan, an auto policy would cost him $5,900 in Alberta.

The comparison study did not include Quebec or New Brunswick.

DISTINCTIONS EXCLUDED

Sutherland says he is skeptical of the report as it was commissioned by ICBC, which is a sole-provider Crown corporation in British Columbia.

"I don't expect monopolies to understand how people shop the market, but this is really a gross misrepresentation of the market in Alberta, of how people behave and how drivers are able to shop around to find savings to get the best product at the best possible price," Sutherland said.

Alberta allows private insurance companies to set competitive rates, while B.C. does not.

Alberta has also maintained an at-fault or tort system, meaning one driver bears the burden for damage.

In a no-fault system, everyone involved pays and there are no opportunities to sue for damages or for injuries.

One finance instructor at MRU says Alberta's high rates could also be a factor of simple economics.

"The demand for insurance is always going to be higher than the supply of insurance providers, that more so is the reason why prices are increasing," said Eric Myers.

CALLS FOR ACTION

Premier Danielle Smith says she has asked the treasury board president and finance minister, and the affordability minister, to look into auto insurance rate affordability concerns.

"Clearly, we need to take a closer look at it," said Smith during question period on Tuesday.

The NDP has announced plans for a private member's bill to impose an immediate one-year freeze on auto insurance.

When the NDP was in government, it instituted a cap on auto insurance premiums, but the UCP government removed it.

Smith said the NDP plan was not effective.

A statement from Treasury Board President and Finance Minister Travis Toews reads in full:

"The NDP rate cap hurt Albertans, Alberta businesses and insurers. When the NDP government brought in a rate cap of five per cent in 2018, premiums went up by five per cent.

"In addition to increased premiums, the NDP rate cap caused many drivers to pay a full year's premium up-front, rather than monthly, and many were denied collision and comprehensive coverage.

"Albertans get better auto insurance coverage thanks to changes our government made. As a result of our actions with Bill 41, Alberta drivers saw improvements such as stabilized rates, increased insurance options and flexibility. Albertans injured in traffic accidents can now access more health professionals, like dentists and psychologists, through their insurance claim. Amounts for grief counselling, income replacement and funeral benefits are now adjusted for inflation.

"As well, the 12-month change in insurance premiums as of the end of November this year is 2.4 per cent. This is less than half of what it would have been under the NDP rate cap."

Former premier Jason Kenney claimed the NDP's policies were forcing insurance companies to leave Alberta because they were losing money.

The opposition says under the UCP, insurance companies enjoyed more than $1 billion in profits in 2020 thanks to higher premiums. 

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