Many of our clients have heard that Auto insurance premiums are set to have a dramatic increase this year. We wanted to take a pro-active approach in making sure you are correctly informed about the Alberta auto insurance rates. We have compiled some of the most commonly asked questions, suggestions & statistical information to provide a better insight into your policy rating.
Frequently Asked Questions:
Q: I have not had a claim; why are my premiums going up?
A: Most people believe that premiums should only go up when you have a claim. However; when claims costs increase across the board, insurance companies pay out more.
Everyone shares this cost.
Note: Even if you do not have children in schools, education taxes still go up.
Q: How is it fair that everyone should share these costs?
A: Insurance protection is purchased to restore the client & others, back to the financial position that they enjoyed prior to the loss occurring. The funds that are used for this restoration are taken from the “bucket” of premium that is in turn, refilled by other policy premiums.
In essence, the losses of the few are paid for by the many.
Note: Let us assume you own a $35,000 SUV that is stolen, and that you pay $1,500 a year for coverage. Even if you have been paying that $1,500 for ten years, there is still a $20,000 deficit. Those remaining funds are sourced from the premium gathered from other clients.
Q: Where are these additional claim costs coming from? People have always had accidents.
A: Claims costs have been increasing for many different reasons;
- The vehicle itself now costs more. 10 Years ago, it was rare to find a vehicle that had built-in back-up cameras. Now, most vehicles come equipped with back-up cameras as standard. Additionally navigation, tire pressure monitoring sensors, automatic vehicle parking, satellite radio, heated & cooled seats, lane change sensors (Lidar, Sonar, Ultrasonic) are all frequently included in modern vehicles. Even an airbag can cost up to $6,000 to replace & generally new vehicles are outfitted with additional airbags (side curtain, knee & inflatable seat belts) that were not previously common.
- Vehicle injury claims have increased in cost. The average cost in 2012 was $47,000. This increased to $73,000 in 2017. Note: That’s a 54.2% increase in 5 years.
- Increase in Theft & Fraudulent claims. Most people would not be surprised to know that Alberta has the highest vehicle theft rate in Canada.
- Weather-related claims are on the rise. Hail losses are increasing especially in Southern Alberta, which hosts more than 40 hail storms every summer, leading to hundreds of millions in damages.
Q: I understand premiums rising, but why such an alarming amount this year? Is it because the rate cap is gone?
A: 1) Alberta insurance companies paid an average of $1.12 for every $1 of premium they received in the year of 2018. This means that with the $2.7 billion in premium that was raised, $3 billion was paid out. That is $300 MILLION in additional losses for just one year.
2) Costs have been rising regardless of the rate cap. With the rate cap in place, Insurance companies were unable to introduce gradual rate changes over the past three years. This cap only serves to delay the inevitable increase needed to cover the expenditures. Now that the cap is lifted, companies have to make larger increases to try and restore profitability.
Q: What sort of information is being used to rate me?
A: The following are commonly used rating factors
- Age and marital status
- Driving experience
- The driving experience is the number of years a driver has been licensed.
- Some insurance companies only recognise driving experience in Canada or the United States, while others may give credit for driving experience from other countries if proof is provided.
- Usually, newly licensed drivers are allowed credit for two or three years’ driving experience if they can show they completed an approved driver training course.
- Driving record
- The driving record measures how many moving traffic violations (any kind other than parking tickets) the driver has had during the past three years.
- Any accidents within the last six years
Note: Some insurers used to allow their clients a grace of 1 or 2 convictions before they would “Surcharge”. Now, the same company(s) are applying “surcharges” after the first conviction.
If you are free of convictions – you may benefit from a discount.
If you have convictions, you may lose the discount & in addition, have the surcharge levied against you.
- Insurance History
- Insureds that have been with the same company (generally six years) normally enjoy a loyalty discount
- Other regular drivers
- People in the household who may not be the primary driver, but still increase the risk of a loss occurring due to their inexperience or imperfect driving record.
Example: A Husband and wife have one vehicle. The husband is the principal operator of the vehicle. The wife has a distracted driving conviction. Even though the husbands driving record is flawless, the premium is still likely to rise to compensate for the added risk of the wife.
- Territory and distance drove annually
- The more a vehicle is on the road, the greater is its chance of being involved in an accident.
- Vehicle usage
- Vehicle description
- Some vehicles are more likely to be stolen than others; thus, they present a larger risk & therefore, the premium collected is far higher (if insuring for the peril of theft).
- Some vehicles are likely to inflict more damage to third party’s or are less likely to protect their occupants, during a collision.
Q: What can I do to help bring my premiums back under control?
A: There are a few things we can do.
- The client can look to retaining more risk via increasing their deductibles. Also when multiple vehicles in the same household are insured with one insurer, the insurer will typically reward them with a “multi-vehicle discount”.
- Let us know of any aftermarket alarms, immobilisers (which impede thieves from starting or driving a car they have broken into), or global positioning system (GPS) devices installed for tracking the vehicle if it is stolen.
- Some companies will offer a discount for vehicles equipped with autonomous braking.