Edmonton, Alberta — The Alberta insurance market is facing significant challenges, leading to the withdrawal of several major auto insurance providers from the province. Earlier this month, Aviva Direct and Sonnet Insurance announced the groups will be ending available auto insurance services in Alberta by late 2024, following in the footsteps of Zenith Insurance’s exit last year.
For consumers, this means they will need to find alternative insurance providers when it’s time to renew their coverage. However, according to Johnny Kloeckes, the owner of six CARSTAR locations in the Edmonton area, the departure of these insurers has had little impact on the collision repair industry.
Rob Rogers, the Manager of MHK Insurance Brokers in Calgary, who works with Kloeckes, noted that the state of the Albertan auto insurance industry is fragmented.
“The main factor contributing to the current auto insurance issues in Alberta is the profitability challenges. I’d be concerned for insurance companies in Alberta if Alberta goes into a public auto system,” Rogers explained.
One of the key challenges—the province’s instituted profitability cap, which limits auto insurers’ profits to a maximum of six percent. This, coupled with increased claims costs and a rate cap, has made it challenging for insurers to operate profitably in the province, said Rogers.
Aaron Sutherland, the western vice president of the Insurance Bureau of Canada, further commented that if Alberta were to consider public insurance, it would cost three billion dollars in taxpayer dollars to start up, according to a report done by the government.
“ICBC and British Columbia have cost taxpayers over four billion dollars in the past decade. SGI in Saskatchewan and MPI in Manitoba are currently leaving red ink again today, and that’s having an impact on taxpayers in those provinces as well,” Sutherland said.
He added that there is a possibility that Alberta can move to a no-fault insurance system, around taking action on the legal class underlying coverage.
“But we need to be thinking about holistic solutions as well, and one that’s jumping out in Alberta more and more is what’s going on not just in the repair industry, but in the towing industry as well,” said Sutherland. “This type of activity is going to begin to exert real pressure on claims as well.”
Heather Mack, the Policy and Communications Advisor at the Automotive Insurance Rate Board, said that the factors contributing to the current auto insurance issues in Alberta are seen in other verticals. For bodily injury, the litigation costs are quite high in Alberta because of the system that they have in place. The province is also seeing continued supply chain issues, cost of parts and cost of repairs.
“All of these things are putting pressure on the premium, and in the midst of an affordability crisis globally, we’re hearing a lot from consumers that are very concerned about how they can afford something that is a mandatory product. It’s not something they can just decide not to insure their vehicle because it’s required by law,” she said.
