Alberta Goes Ahead With Reform Package

Alberta’s auto insurance reform plans have received the final stamp of approval from the provincial cabinet, setting the launch date for the beginning of October this year. A committee of legislators is being put together to ensure a smooth transition to the new system, which includes a premium grid. The government has promised rates will drop 5% for about 95% of drivers, although others could see rates drop as much as 75%. This is because traditional rating criteria such as age and gender are no longer allowed.

The current rate freeze will stay in place until the summer of 2005. Among the new program’s features, public insurers such as those in Manitoba, Saskatchewan and B.C. will be allowed to sell insurance in Alberta. Following introduction of the reforms, the committee of legislators will report back to the finance ministry in September 2006.

The new scheme will see good drivers subsidizing bad, says Pembridge Insurance Co. president Bob Tisdale. While the plan will see rates drop by 5% for good drivers, bad drivers receive the greatest benefits, he contends, with rates dropping by more than 50%.

This is because high-risk drivers, including those with accident records, traffic violations and even those who have had their license suspended in the past, will be in the same category as low-risk drivers on the government’s new premium grid. “We are extremely disappointed that under the reforms introduced in Alberta, individuals with bad driving records will save thousands of dollars while those with good driving records will save as little as $60,” he adds.

Tisdale says the correct response to rising rates in the province includes product customization, claims reform, road safety initiatives and appropriate risk assessment for the middle market.