Rate caps threaten availability and coverage quality of auto insurance in Alberta, warns the MEI

• Strict rate caps such as Alberta’s are nonexistent in better-functioning European auto insurance markets.

Calgary, 14 janvier 2026 – Alberta should abandon its price control measures in order to increase stability and choice in the auto insurance market to the benefit of consumers, according to a newly released Economic Note from the MEI.

“Price control measures might save drivers a few dollars in the short run, but they end up costing more in the long run by driving away competition and product offerings,” explains Gerard Lucyshyn, senior economist at the MEI and author of the publication. “Ahead of Alberta’s planned auto insurance reform, the Smith government must do away with its rate caps.”

In Alberta, auto insurance rate increases are approved yearly by the Automobile Insurance Review Board based on criteria established in its enabling legislation. In recent years, many of these criteria have imposed pernicious price controls.

From 2017 to 2019, for instance, the NDP government imposed a general cap of five per cent on all rate increases. In 2023, the UCP government imposed a year-long pause on rate increases, and then followed that up with what it called a “safe driver” rate cap that remains in place for 2026.

The researcher explains that these price controls prevent premiums from adjusting naturally, which can lead policies to become unsustainable.

“Insurance premiums are inherently a reflection of risk,” adds Lucyshyn. “If premiums can’t be adjusted to reflect a rise in claims, it will become harder for drivers to find insurance, as companies either continue to exit the market or become more selective about who they insure.”

Since the UCP’s 2023 year-long pause on rate increases, three insurance companies have left the Alberta’s automobile insurance market, citing costs exceeding premiums.

According to a recent report from Statistics Canada, approximately one-third of insurance companies in Alberta were unprofitable in 2023.

In 2024, the average insurance company in Alberta paid out more in claims and other costs than what it collected in premiums.

Companies paid out $1.18 for every dollar of revenue they generated from the sale of services, according to the latest annual report from the Superintendent of Insurance. This represents a $1.2-billion shortfall for Alberta’s automobile insurers in 2024.

Lucyshyn explains that unprofitability caused by rate caps can lead to wilder fluctuations in prices, as companies attempt to make up for accumulated losses in other years. He recommends looking to European insurance systems for inspiration on beneficial insurance reform.

“Rate caps, like we have in Alberta, are not the norm everywhere,” says Lucyshyn. “In the European Union, and in Switzerland as well, such broad caps don’t exist, and regulators focus more on making sure rate increases are justified by rising expenses.

“Alberta should take inspiration from those models rather than keep imposing more rate caps, leading to less consumer choice.”

You can read the Economic Note here.

* * *

The MEI is an independent public policy think tank with offices in Montreal, Ottawa, and Calgary. Through its publications, media appearances, and advisory services to policymakers, the MEI stimulates public policy debate and reforms based on sound economics and entrepreneurship.

— 30 —

Interview requests
Natacha Radenkovic
Intern, Communications
Cell: 514-497-6174