Clients struggling to secure physical damage coverage in Alberta

Alberta brokers and regulators alike are reporting difficulty obtaining Section C physical damage coverage for auto insurance clients. And insurers acknowledge availability is a problem.

Section C is an optional benefit covering damage to vehicles and is not required by all insurance policies. Following Alberta’s good driver rate cap, which was renewed in 2025 and caps auto insurance increases at 5%, insurers have resorted to tightening underwriting and restricting certain optional coverages in an effort to maintain profitability. 

“Coverage availability under the good driver rate cap has been a challenge right now,” says Laurie Balfour, executive director of the Alberta Automobile Insurance Rate Board, which regulates rates for auto insurance companies in Alberta. “It’s probably almost impossible if you’ve had accidents or tickets to get Section C coverage.”

Balfour was one of many people addressing the topic at the Insurance Brokers Association of Alberta’s Convention 2025 in Banff, Alta., this week.

“It is something that we are looking at, because the government has in the past issued guidance telling insurers not to [restrict coverages],” she said during a regulator Q&A session. “So there is some authority there for them to do something. And it’s just a matter of them figuring it out within this new framework.” 

Under the Alberta government’s good driver rate cap, a good driver is everyone except those who have: 

• Any at-fault accidents in the last six years 

• Any criminal code traffic convictions in the last four years 

• Any major traffic convictions in the last three years 

• More than one minor traffic conviction in the last three years 

But for brokers, there’s a wide chasm between a good driver and a bad driver. And when clients fall into that gap, they lose out on coverage options, brokers told regulators at the conference.  

“I think everyone in this group is pretty much tired of hearing ‘Wait until Jan. 1^st, 2027, and everything will be magically better,’” one broker put it bluntly. “Is there a plan now to help carriers [get rate adequacy], so we can get options, get these coverages?”

The speaker was referring to the Alberta Government’s plan to transition to a “Care First,” a no-fault insurance system expected to take effect in 2027. The government has indicated the insurance premium rate cap will remain in place until then. 

Balfour responded: “There are discussions going on about the potential to amend or to repeal the rate cap, and the timing of that is a political decision. At this point, we’re advising the government officials to make those decisions.” 

When asked what measures AIRB is taking to address insurers’ Section C coverage restrictions, Balfour said, “The Rate Board has been advocating strongly with the department that we [need to] have more teeth to be able to enforce and regulate underwriting.” 

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When Alberta’s government first implemented a rate pause, effective January 2023 to the end of that year, Balfour says the government required insurers to maintain optional coverages. 

“But they pulled it back when they introduced the good driver rate cap, and that was followed by industry [putting] those coverage restrictions right back on,” she says. 

“Especially if you’re a younger driver, those accidents follow you for six years and you can’t get the collision coverage that you need — that’s a huge issue for us,” Balfour says. “That’s why I said when the good driver rate cap comes off, to me, those [underwriting] restrictions have to be removed at the same time.” 

Insurers respond 

IBAA CEO Jhnel Weller-Hannaway asked insurer executives during a separate panel discussion about how Section C restrictions impact access for Alberta drivers. 

Rosa Nelson, vice president of sales and business development at Intact replied: “Ninety percent of customers that are with Intact actually get Section C. There’s only less than 10% that don’t get Section C. Having said that, Section C availability is a problem.”

That limited availability, she explains, ties directly to the industry’s ability to accurately price the product.

“At the end of the day, we need to be able to price appropriately in order to provide that coverage,” she said. “That’s as simple as it gets. I wish that I could say there were alternate solutions that we can find. We want to be in the market providing comprehensive, complete coverage for every Albertan that requires it. That’s our job. We do very good work here, so having this limitation on Section C is problematic for sure. And even though it affects maybe a small component of the population, we know that there needs to be a solution.” 

Insurers said the government needs to provide relief on pricing. That means either removing or amending the rate cap.

“We’re really trying to advocate with the government, to say to them, ‘We need relief here when it comes to pricing,’” Nelson said. “Because we want to be able to provide full and complete coverage, and we can’t do that — the product would not remain sustainable if we were not able to price appropriately.”

Insurers across the board are feeling the pinch from the auto rate cap, and subsequently restricting coverages.  

“It’s publicly available [that] every dollar of auto we write, we write it at a loss,” said Kimberly Palatnick, senior vice president and chief personal lines officer at Wawanesa. “How sustainable is that in the long term? It’s a huge problem not being able to price for the risk.” 

She adds: “We have a very small part of our book that doesn’t have Section C, but when pricing is restricted, that’s where you need to go. To us, restricting is the last resort. It is absolutely last resort.” 

Although insurers may have a small pool of customers who can’t get Section C coverage now, “what is this going to look like in a year from now, or 18 months from now?” Weller-Hannaway asked insurers on the panel.

“That pool that you’re talking about seems to be getting greater and greater every single day,” Weller-Hannaway observed. “So I would implore [insurers] to try to find a solution or get in front of government as much as possible to help us, because…consumers, who….we do our business for, they have no options.”

Alyssa DiSabatino

Alyssa Di Sabatino has been a reporter for Canadian Underwriter since 2021, covering industry trends, market developments, and emerging risks.