Alberta’s auto insurers face growing financial strain as tariff-related cost increases and rising claim expenses collide with a government-imposed rate cap.
Industry data shows insurers paid out $1.17 in claims and expenses for every $1 earned in premiums in 2024, calling into question the viability of continued pricing limits.
The Insurance Bureau of Canada (IBC) commissioned Deloitte to assess how recent tariffs are affecting the property and casualty insurance sector. The analysis found that a 25% economy-wide tariff - imposed by the US and matched by Canada - could increase the cost of vehicles and replacement parts by up to 10.9% for most insurers. While not fully implemented, these tariffs, combined with changing production patterns, could lead to an increase of up to 5% in auto insurance premiums for Alberta drivers.
Current tariffs include a 25% US duty on Canadian steel and aluminum effective March 12, raised to 50% on June 3. In response, Canada imposed 25% counter-tariffs on non-CUSMA-compliant vehicles imported from the US, affect roughly one-third of imported vehicles.
Meanwhile, some auto manufacturers have cancelled or delayed Canadian expansions, disrupting parts supply chains and increasing repair costs.
Aaron Sutherland, vice president for Pacific and Western at IBC, said these developments introduced cost pressures that were not anticipated when Alberta extended its “good driver” rate cap last fall. He said that without the ability to adjust rates to match new expenses, insurers may need to reduce coverage availability to maintain financial viability.
Additional cost pressures are reflected in the Auto Insurance Rate Board’s (AIRB) recent benchmark loss trends.
The AIRB’s latest Semi-Annual Review projects that over the next year, bodily injury claim costs will rise 9.1%, accident benefits - including medical, rehabilitation, and income replacement - will increase by 5.5%, and vehicle damage claim costs will grow approximately 10%.
IBC maintains that the current pricing limits, in place for more than three years, are contributing to the financial difficulties in the industry.
According to the Bureau, this is the longest period of government price intervention in the province’s auto insurance market.
Sutherland said that without changes to the rate cap policy, insurers may continue to face challenges meeting the cost of claims.
Should the Alberta government reconsider its rate cap policy in response to rising costs? Share your thoughts in the comments.
