Trade dispute adding costs for Alberta drivers 

Tariffs are making a bad situation in Alberta auto insurance worse. 

Loss trends related to litigation costs and vehicle repair claims already exceed Alberta’s current 7.5% rate cap on auto insurance. Add tariffs into the mix — which are also raising the cost of new vehicles and auto parts — and insurers are facing additional cost pressures atop already existent ones, says a new Insurance Bureau of Canada report. 

“There is a lot of confusion surrounding tariffs, but the reality is they are here and are adding significant cost pressures to vehicle repairs and replacements that were completely unforeseen when the government extended the auto insurance rate cap last fall,” said Aaron Sutherland, IBC’s Pacific and Western vice president. 

Under the cap, insurers’ filing rate increases with the province’s Automobile Insurance Rate Board are capped at 5% for ‘good drivers,’ which include those without a claim for certain periods outlined in the law. Also, Alberta allows insurers to add an additional temporary surcharge of 2.5% to account for natural disaster costs related to the Jasper wildfire and Calgary hailstorm. That’s a total of 7.5% in rate increases for 2025 alone.  

But the rate cap, renewed in the fall for Jan. 1, 2025, didn’t account for the Canada-U.S. trade war, which happened after Alberta extended the cap.  

What’s the price 

Prices for new vehicles and replacement parts will increase by up to 10.9% for most insurers because of the United States’ 25% economy-wide tariffs, followed by Canada’s counteraction, finds a Deloitte report commissioned by IBC. 

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Tariffs have negatively affected several areas of the auto sector, Deloitte finds, including: 

• New vehicles and auto parts: U.S. tariffs of 25% on Canadian steel and aluminum went into effect on Mar. 12, and were raised to 50% on June 3. This is increasing the cost of new vehicles and auto parts. 

• Imported vehicles: Canadian counter-tariffs of 25% on non-CUSMA-compliant vehicles imported from the United States are increasing the cost of one-third of imported vehicles. 

• Manufacturing shutdowns: Auto manufacturers have begun to pause, cancel, or close the expansion of their Canadian operations, placing further strain on vehicle repair and replacement supply chains, as well as increasing cost pressures. 

“New cost pressures created by the trade dispute with the United States are piling on top of other cost pressures in the auto insurance system and creating new challenges for insurers who are paying out more money in claims than they take in through premiums,” says Sutherland. 

“The current ‘good driver’ rate cap does not reflect these new cost pressures,” he says. “This situation is unsustainable, and the province must act and end the rate cap before further damage is caused.” 

Due to the rate cap, Alberta auto insurers paid out $1.17 in claims and other expenses for every $1 they earned in premiums in 2024, IBC reports.

Alyssa DiSabatino

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