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Alberta’s rate cap is deepening financial losses in the province’s auto insurance market, industry experts say, as a new report found auto insurers lost more than $1.2 billion in 2024.

The latest annual report from Alberta’s superintendent of insurance, released last month, cited the Calgary hailstorm and the Jasper wildfire as major factors driving the loss.

As a result, the Insurance Bureau of Canada (IBC), the national industry association, said insurers had to pay out 18 per cent more in claims than drivers paid in premiums. About 35 auto insurers in Alberta suffered a financial loss that year.

“The superintendent expects this pressure on Alberta’s automobile insurance profitability and stability to continue through 2025,” the annual report says.

Aaron Sutherland, IBC’s vice-president of Pacific and Western regions, said provincially regulated rate caps and high legal costs are factors that make it difficult for insurance companies to operate in the province.

“We’ve seen multiple insurance companies forced to leave Alberta. That means less competition, less choice, and the insurers that remain here are restricting the sale of coverage,” Sutherland said.

“It’s not improving affordability. In fact, it’s doing the opposite and it’s making auto insurance much more difficult to secure at a time when it’s needed the most.”

The provincial government introduced the “good driver rate cap” in 2024, limiting the amount insurance premiums can go up in a given year.

The cap was initially set around 3.7 per cent, then increased to 7.5 per cent in 2025.

The annual report forecasts escalating claims costs will continue to exceed that cap due to inflation, growing severity of bodily injury claims, vehicle theft rates and weather-related losses.

“[The rate cap] pales in comparison to the growth and cost pressures underneath coverage —  legal costs, the cost of theft, the cost of natural disasters like hail events, those are going up well in excess of that,” he said.

“With the cost of delivering coverage growing far faster than the price you’re able to charge, that simply isn’t sustainable.”

Those observations ring true for Heather Mack, manager of education and engagement with the Alberta Automobile Insurance Rate Board, which sets auto insurance rates in the province.

She said the biggest cost driver in auto insurance in Alberta is third-party liability or bodily injury — when the driver who isn’t at fault sues the other to compensate for things like medical costs and property damages.

“We’ve seen a huge spike in the size of these awards — and it’s not money that’s definitely going to medical and rehab. [They are] significant legal awards and it’s driving up the cost of insurance for everyone,” Mack said.

In a statement to CBC News, the Ministry of Treasury Board and Finance listed inflation, legal fees, more vehicle thefts, weather-related losses and tariffs as factors putting pressure on Alberta’s auto insurance market.

Its list excluded the rate cap.

New insurance model planned

The Alberta government plans to implement the Care-First insurance model in 2027, which would settle the majority of injury claims without going to court.

The system would resemble the publicly delivered “no-fault” systems in Manitoba, Saskatchewan and British Columbia, but it would be delivered by private insurers.

The government’s announcement has been met with mixed messages. Some critics have said dangerous drivers would face less accountability and leave few options for drivers who have been injured in collisions.

But Mack said, if done right, the new system would prioritize recovering people faster, “without lengthy delays and lawsuits being required,” while stabilizing the cost of auto insurance for all drivers.

“That’s going to take a bit of a culture change, especially on the industry side,” she said, adding that the current system takes more of an adversarial approach.