Auto insurance can sometimes seem more mysterious than an Agatha Christie novel. Why do your premiums continue to rise if you haven’t had any claims?
While your driving record is the most important factor in determining your insurance rate, drivers and insurers in Alberta must also account for other factors, such as auto theft, poor driving habits (especially distracted driving claims), weather, and increasing medical and vehicle repair costs.
“Your premium is calculated based on these factors and the likelihood of you having a future claim,” says James Setch, vice president of operations for AMA Insurance.
HOW IS INSURANCE REGULATED?
While rates vary from one insurer to another, the Alberta Insurance Rate Board (AIRB) oversees them all. It reviews companies’ proposed rate changes, balancing the premiums they receive with the claims they pay out.
“The principle of insurance is that the losses of the few are paid by the premiums of the many,” Setch says. Premiums must also fall within Alberta’s Grid rating program, an algorithm that, according to Setch, “establishes a ceiling on what insurance companies can charge for basic auto insurance.”
SOME FACTORS THAT AFFECT RATES
Even if insurance rates are regulated, they’re not static. Companies look at variables like your age, type of vehicle and driving history (e.g. past tickets or claims) to calculate the level of risk that you represent.
MORE TO READ
What you need to know about the digital pink card for auto insurance
At the same time, they must account for other factors—including damaging weather events and vehicle thefts, both of which occur more often in Alberta than anywhere else in Canada. Setch says medical costs are also a major driver of rate increases: Collision-related injury claims are being pursued more often and, due to rising treatment costs, more money is being paid out.
WHAT YOU CAN DO
As Albertans, we’re all in this together. By nurturing a few good habits, we can decrease the number of auto insurance claims—and help lower rates for everyone.
To combat theft, always lock your vehicle—and never leave it running unattended in winter. Park it in a garage, when possible, to protect against theft and hail damage. On the road, minimize the risk of whiplash—a common car-accident injury—by ensuring every passenger’s headrest
is properly positioned. The tops of your ears should line up with the middle of the headrest.
MORE TO READ
A clear view of auto-glass insurance
And avoid risky behaviours like distracted driving, speeding, tailgating and hard braking. “A clear driving record is a significant factor in setting your rate, so continue to operate your vehicle as safely as possible,” Setch says, adding that young drivers can help reduce their premium by completing an accredited driver education program.
To learn more about how insurance works, contact an AMA Insurance advisor at 1-800-615-5897 or online.
A few factors influencing Alberta auto insurance rates.
High tech: Advanced driver assistance systems and other vehicle tech have made repairs more expensive. A sensor-filled bumper may now cost up to $10,000 to fix.
Auto theft: Alberta accounts for one-third of all vehicle thefts in Canada. It costs drivers and insurers upwards of $80 million a year to replace stolen cars and trucks.
Extreme weather: Last year, there were nearly 100 hailstorms in Alberta (double the province’s 30-year average). So far in 2020, Alberta has recorded $2 billion in weather-related losses.
Medical costs: It’s becoming more expensive to treat injuries caused by vehicle collisions. Costs have increased by 10% annually for the past five years.