Extreme weather remains the wild card as Alberta aims to fix auto insurance system
Posted November 22, 2024 3:40 pm.
A global credit rating agency says Alberta’s sweeping changes to its auto insurance system are a step in the right direction, but rising claims from hailstorms remain the wild card.
Nadja Dreff, senior vice-president and sector lead for global insurance and pension ratings with Morningstar DBRS, says the reforms announced Thursday by the Alberta government are a positive move for what has been an increasingly unprofitable market for insurers.
She says the government’s decision to allow rate hikes of up to 7.5 per cent per year, compared with a previously allowed cap of 3.7 per cent, will give insurers more certainty about their ability to keep operating in the province.
But Dreff says the biggest threat to Alberta’s auto insurance sector is the rising number and severity of natural disasters in the province, particularly hailstorms.
She says it remains unknown whether the new higher rate cap will be enough for the industry to cover off increased payouts related to future hailstorms.
The Insurance Bureau of Canada says Alberta has experienced five of the top 10 costliest natural disasters in Canadian history, all of which have occurred since 2016 and have placed significant strain on home, business, and auto insurance premiums.
