Alberta’s auto insurance cap is squeezing insurers — and more drivers are feeling it, too

Auto insurers in Alberta paid out significantly more in claims and expenses than they collected in premiums last year, underscoring growing strain in the province’s insurance market, and raising fresh questions about what drivers could face next.

According to a new annual report from Alberta’s Superintendent of Insurance, property and casualty insurers lost more than $1.2 billion on auto insurance in 2024, paying out 18% more than they took in from drivers. The findings come amid ongoing government limits on how much insurers can raise rates, even as claims costs continue to climb.

The Superintendent warned in a statement that “escalating claims costs due to inflation, bodily injury claims severity growth, vehicle theft rates and weather-related losses will continue to exceed the Good Driver Rate Cap,” suggesting financial pressure is unlikely to ease in the near term.

Why insurers are losing money

Alberta has been under some form of auto insurance rate intervention since 2023. After a year-long pause on rate filings, the province introduced a “Good Driver” rate cap of 3.7% in 2024, which rose to 7.5% in 2025 and will remain at that level through 2026.

While the cap was intended to protect drivers from sharp premium increases, the Superintendent’s report shows it has coincided with mounting losses across the industry.

In 2024, 35 auto insurance carriers operating in Alberta reported financial losses, and several insurers have since exited the market or scaled back the coverage they offer.

For Alberta drivers, that has had real consequences. Insurance brokers increasingly report difficulty finding coverage, particularly for higher-risk drivers or specialized policies, as competition continues to shrink.

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Rising costs behind the scenes

The report points to several cost pressures that are outpacing Alberta’s current insurance rate cap:

• Legal costs related to auto claims have risen 34% over the past two years and are projected to grow again this year
• Care and recovery benefits for injured drivers are up about 25%, with further increases expected
• Auto theft costs have climbed 21%, adding to insurers’ claims burden

At the same time, insurers have faced higher levies. Over the past three years of rate intervention, Alberta has increased its Health Levy on auto insurers by 70%, further squeezing margins.

“This new report confirms once again that, rather than helping Albertans, the rate cap is harming the competitive market that consumers depend on,” said Aaron Sutherland, Vice-President, Pacific and Western, at the Insurance Bureau of Canada, in a statement.

What this means for Alberta drivers

While rate caps have limited premium increases for many drivers, the report suggests there are some key trade-offs.

Fewer insurers and tighter underwriting can mean less choice, stricter eligibility and challenges securing coverage — especially for drivers with claims histories or unique insurance needs.

The IBC argues that Alberta’s proposed Care-First reforms, expected in 2027, could help reduce legal costs and stabilize premiums if combined with measures to attract insurers back to the market.

For now, Alberta drivers face a mixed reality: premiums are capped, but the system behind them is under serious strain. How long that balance can hold, and whether it ultimately leads to higher costs or fewer options, will depend on how quickly claims costs are brought under control and competition returns to Alberta’s insurance market.