Insurers face added pressure under Alberta’s latest auto renewal directive

If a policyholder wants to renew an auto insurance policy with their current insurer through a different broker, the insurer must treat it as a renewal, not a new policy, says a recent bulletin from Alberta’s Superintendent of Insurance.

It’s yet another example of a regulatory move that could put pressure on carriers in an already-difficult rate environment, auto insurers say.

The example is this: A carrier terminates its contract with a broker. The broker’s auto insurance client moves to another broker. The auto insurer refuses to treat the customer’s private passenger vehicle insurance as a renewal because the insurer no longer does business with the customer’s previous broker. That “constitutes an adverse contractual action” under the province’s Insurance Act, the June 30 bulletin from Alberta’s Superintendent of Insurance says.

Alberta’s auto insurance regulator says it took this position based on evidence some insurers were refusing to renew the private passenger PPV coverage of clients who moved to different authorized brokers after the insurers had terminated business contracts with a client’s existing broker. 

“Instead, they treat the insured as new business rather than as a renewal,” the bulletin says. “As a result, these insurers refuse to apply ‘good driver’ premium protections and/or offer coverage that is more restrictive than what would have been provided under a renewal.” 

This measure could put further strain on the province’s auto insurers, who are already struggling to stay profitable, says Aaron Sutherland, Insurance Bureau of Canada’s western and pacific region vice president. 

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“As a result of what’s been forced on insurers from the rate cap, the Superintendent is using the powers available to it to try to intervene in some of the insurer’s actions which are really only being undertaken to try and stay viable,” he says.  

“What I worry about is that the more the superintendent clamps down on the actions insurers are taking to try to be viable, the more likelihood that we will see further insurers forced to leave the province entirely — and that’s an even worse outcome.” 

Currently, the good driver rate cap in Alberta is set at 7.5% — which includes a 5% base cap and an additional 2.5% surcharge in 2025 due to hefty natural disaster claims from the previous year.  

“When the price of your product is capped lower than the cost of delivering it, that’s not viable for any industry, and insurance is no exception,” says Sutherland. 

Auto insurers in Alberta lost a -20% weighted average return on premium in 2024, according to a recent profit examination by Alberta’s Automobile Insurance Rate Board (AIRB).  

Alberta’s good driver rate cap has already led insurers to take drastic steps to remain profitable, including withdrawing from the province, breaking broker contracts, or reducing the availability of optional coverages.  

Specifically, brokers at the Insurance Brokers Association of Alberta convention in May reported having a small pool of customers who can’t get Section C coverage, designed to cover accidental loss or damage to an insured’s vehicle. 

They say they are more frequently fielding calls from clients who can’t access Section C coverage, says Caleb Maksymchuk, past president and board chair at IBAA. 

“They’re just frustrated because they can’t find it from anyone, anywhere,” he says. “That’s the current problem that we’re dealing with.” 

He says brokers are eager for the province’s Care First model to be implemented come Jan. 1, 2027. The province says the new model will be designed to provide faster, better and more accessible care via medical and income replacement benefits following a collision.  

“Brokers will adapt. We’re very adaptable and we will continue to keep that client focus. That is the power of having a broker — we are in your corner,” says Maksymchuk.  

Alyssa DiSabatino

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