Alberta to ditch auto insurance grid as part of care-first reforms

Alberta is removing its 22-year-old auto insurance ‘grid’ rating system, which caps premiums for high-risk drivers, when it introduces its new care-first auto insurance reforms on Jan. 1, 2027.

“The grid will be repealed effective Jan. 1, 2027, as part of the transition to the care-first insurance model,” Alberta’s auto rate regulator, the Alberta Insurance Rate Board (AIRB) announced in a bulletin to insurers dated May. 16.

“Care-first is designed to reduce third-party liability costs, which have historically been the main reason inexperienced drivers faced higher premiums. With these changes, the original purpose of the grid will no longer be necessary.”

Alberta’s proposed government reforms will limit the ability of claimants to sue for damages in court after auto accidents. In return, the province is introducing a rich accident benefits package for those injured in car collisions, dubbed “Care-First.”

Long a bane of Canadian auto insurers’ existence, Alberta’s grid system capped the premiums of high-risk drivers at a maximum amount.

To make up for the additional premiums required to cover higher-risk drivers, the province’s auto insurers elevated pricing for safe drivers’ mandatory insurance coverage. In other words, Alberta’s safe drivers were essentially subsidizing Alberta’s higher-risk drivers, auto insurers have told Canadian Underwriter.

Insurance Bureau of Canada called for “an overhaul” of the grid rating system in 2022, when a report by Deloitte LLP found the province’s safe drivers were subsidizing the worst drivers to the tune of almost $10,000 per year.

Also in the news: Why BrokerLink keeps buying — and why small-town brokers keep selling

Deloitte’s report found “52% of drivers subsidized by the grid have more than seven years of driving experience and are not the new drivers that the system was intended to support.”

On average, the report said, individual high-risk drivers in Alberta with a history of at-fault claims and infractions received an annual subsidy of $2,516.

As for Alberta’s worst drivers, those with an extensive history of claims and infractions, they received an annual subsidy of $9,859, Deloitte’s report stated.

“Alberta’s grid resulted in safe, responsible drivers paying more than they should for mandatory auto insurance coverages in order to subsidize those with a history of high-risk driving behaviour,” IBC commented after the AIRB’s announcement. “The removal of the grid will help improve the affordability of auto insurance for safe drivers, while better incentivizing more responsible driving behaviour on Alberta roadways.”

Insights Paid Content

From Cracked Engines to Critters: Common Boat Claims and Avoidable Oversights

Aviva’s Marine Assessment Unit shares real world boat claims, coverage surprises, and practical insights brokers can use to better protect NauticLife customers.

AIRB’s bulletin does suggest some alternate form of the grid could return, however, if the Alberta auto reforms don’t protect new drivers as expected.

“While the repeal of the grid is expected to align premiums more closely with individual driving and claims histories, the AIRB recognizes some drivers may experience premium increases as a result,” the bulletin states.

“The AIRB expects insurers to ensure their rating algorithm does not unfairly rate inexperienced drivers. If significant premium increases occur because of the grid repeal, the AIRB will develop and implement a replacement mechanism to ensure appropriate consumer protection.”