For seven of the last 10 years, Alberta’s auto insurers have been subject to government-imposed rate interventions. While these price controls are intended to protect drivers, in reality, they hinder market competition, distort pricing and push the market into a sustained period of financial loss – ultimately harming the very consumers they are supposed to help.
Alberta’s Superintendent of Insurance reported that in 2024 alone (the last full year of available data), 35 insurers lost money on the sale of auto insurance, contributing to a record $1.2 billion loss across the industry. The Superintendent’s report found that insurers paid out 18% more in claims and expenses than they collected in premiums, underscoring the unsustainable operating environment created by prolonged rate interventions.
Now a new report from the Montreal Economic Institute (MEI), an independent think tank, confirms what economic experts have warned for years: Price controls on auto insurance are highly detrimental, sending strong anti-market signals that reduce choice for consumers, weaken competition and undermine long-term affordability of insurance.
Alberta’s repeated rate interventions
Since 2017, Alberta’s insurers have experienced multiple rate interventions:
5% rate cap between 2017 and 2019
Full rate freeze in 2023
3.7% “good driver” rate cap in 2024
7.5% “good driver” rate cap in 2025 and continuing into 2026.
MEI found that when auto insurance premiums are prevented from reflecting real-time risk and costs, insurers are often forced to respond by restricting coverage offerings, tightening underwriting or exiting the market altogether. This has been seen in Alberta, where three carriers have left the market, forcing tens of thousands of drivers to seek coverage with other insurers. As a result, many drivers now have fewer choices, less tailored coverage and higher prices. This particularly affects drivers who no longer qualify for the government’s “good driver” rate cap simply because they were forced to switch insurers.
Clearly, government intervention on auto insurance rates in the province has led to a market that is less competitive and less accessible for Alberta drivers.
Compounding the problem is the fact that Alberta’s continued rate intervention has made the province an unattractive market for new auto insurers. The uncertainty created by rate caps, freezes and political interference in pricing discourages investment and innovation, limiting the ability of new competitors to replace those that have exited the market. Without new market entrants, consumer choice continues to shrink, and competitive pressure on prices is further weakened.
Rising cost pressures cannot be capped away
Rate intervention has not constrained the price consumers pay for auto insurance or the costs companies must charge to provide the coverage; instead, costs have continued to grow since the rate cap was imposed:
Legal costs have grown 34% and are projected to grow 8.7% this year.
The cost of delivering care and recovery benefits to those injured in a collision has increased roughly 25% and is projected to grow nearly 12% this year.
The cost of auto theft is up 21%.
During the more than three years of rate intervention, the Alberta government has increased the health levy on auto insurers by a staggering 70%.
These cost pressures are unavoidable. Rate caps do not eliminate costs; they merely delay and distort how costs show up, often leading to sharper increases in premiums later or shifting costs onto certain groups of drivers.
Independent experts confirm the damage
MEI is the second independent organization to document the harms caused by Alberta’s rate intervention. In September 2024, accounting firm MNP found that:
Premiums increased 12% over 18 months under the rate freeze and cap.
Drivers outside the government’s “good driver” definition saw premiums rise by an average of 15% annually.
MNP also identified several unintended consequences for consumers:
Young and new drivers are disproportionately impacted by high prices and less availability of coverage.
Drivers who switch insurers may lose “good driver” status.
Many drivers fall outside the rate cap for reasons unrelated to driving behaviour, such as moving to a new home, adding a spouse or child to their policy, buying a new vehicle or changing insurers.
These outcomes reduce consumer choice and make it harder for drivers to shop around for the best rate that matches their risk profile.
Care-First offers a promising path forward if rate caps end
As Alberta moves toward implementing its Care-First auto insurance reforms in January 2027, there is genuine reason for optimism. The new system promises faster access to care and recovery supports after a collision, the most generous medical benefits in the country and lump-sum payments for permanent impairments that go directly to injured Albertans – rather than being consumed by costly legal battles.
However, the current rate cap distorts the true cost of today’s auto insurance system, making it harder to accurately measure the savings Care-First is expected to deliver. If the government removes the rate cap and allows actuarially-justified pricing, the full benefits of Care-First, including greater and more sustainable savings, will be clearer and more meaningful for drivers.
Just as importantly, the government should provide certainty to insurers in Alberta’s auto insurance market by committing to not imposing any further rate interventions under the Care-First model.
Putting Alberta back on a competitive footing
Alberta has a narrow but critical window to reverse years of policy-driven market damage. Ending the rate cap is a prerequisite for a functioning, competitive market that can retain existing insurers and attract new entrants willing to invest in Alberta and deliver consumer choice.
By removing the rate cap, restoring confidence in the insurance market and letting Care-First reforms operate as intended, Alberta can put the “open-for-business” sign back up and ensure drivers finally see the full benefits of a stable and sustainable auto insurance system.
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