The Canadian Federation of Independent Business (CFIB) and the Insurance Bureau of Canada (IBC) have called on the Alberta government to eliminate taxes on auto insurance policies as part of its upcoming 2024 provincial budget.
Currently, Alberta drivers are subject to a 4% insurance premium tax (IPT) on their auto insurance policies. The province also imposes a levy on auto insurance to cover healthcare expenses, which is slated to rise by 28% in 2024.
According to the joint statement from CFIB and IBC, the IPT has seen a 28% increase since 2018, resulting in over $1 billion in added costs. Additionally, the amount collected from the levy is expected to jump to $86.8 million this year.
When combined, these taxes contribute around $100 to each driver’s policy annually, the statement noted.
aron Sutherland, the IBC’s vice president for Pacific and Western regions, highlighted the challenges facing the auto insurance market in Alberta, including inflation, severe weather, auto theft, and rising legal costs.
“IBC is eager to work with the government to undertake reforms to address these costs and improve the affordability of auto insurance. In the interim, we are asking the province to remove – or at the very least pause – the IPT and cost-recovery levy for health care to provide near-term relief to drivers,” he said.
The removal of the IPT would also extend support to Alberta business owners, according to Annie Dormuth, CFIB’s Alberta provincial affairs director.
Dormuth pointed to CFIB’s Monthly Business Barometer, which reported that insurance costs were a significant input cost constraint for 11 months in 2023. Moreover, 71% of those polled for the study identified insurance costs as the most detrimental factor to their businesses, second only to utility costs.
“As part of the Throne Speech, the government committed to affordability and insurance reforms that would reduce premium costs,” she said.
“One quick and effective way for the government to fulfil its commitment is to pause or reduce the IPT. Doing so will help Alberta small businesses and families cope with cost increases and inflationary pressures.”
Alberta’s government previously announced a cap on auto insurance rates for good drivers, restricting the increase of premiums to no more than the 3.7% inflation rate in September.
The IBC said the government’s definition of a good driver applies to roughly 80% of drivers in the province, effectively limiting insurers’ ability to raise rates for most of Alberta.
In a statement from November, Sutherland pointed to the IBC’s Enhancing Care & Expanding Choice proposal and said the framework “presents the best opportunity to achieve this and creates the best balance between a tort and no-fault insurance system.”
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