Edmonton, Alberta — The Insurance Bureau of Canada (IBC) reports that Alberta’s ‘good’ drivers are being forced to pay auto insurance premiums to subsidize high-risk drivers.
Using data from a Deloitte LLP report, the IBC said on Wednesday that it discovered that the province’s worst drivers have been offered subsidized insurance rates for 20 years.
Notably, the agency says that under Alberta’s grid rating system, high-risk drivers are offered a cap on the amount of premiums they would be required to pay.
Using a stepped point system ranging from -15 to +15 and above, grid steps correspond to the highest premiums that insurance companies can charge for mandatory coverage, the report notes. Drivers pay the lowest premium of that determined by the grid rate formula set by the Automobile Insurance Rate Board (AIRB) and by that of the relevant insurer’s internal risk classification network.
To collect its data, Deloitte LLP’s report looked at seven medium to large-sized insurers that make up approximately 80 percent of the private passenger vehicle auto-insurance market in Alberta and then investigated the demographic profiles of drivers capped by grid premiums. The IBC then analyzed the cost subsidy these drivers receive and the difference between an insurer’s premium and the grid premium when the latter was the lesser of the two.
As a result, the Deloitte LLP report found that ‘safe’ drivers are charged $180 million in auto insurance premiums—or$65 per person—to subsidize the premiums of high-risk drivers.
The report also found that Alberta’s worst drivers are being offered average annual subsidies of $9,859.
“Insurance encourages safe driving habits and is a vital public safety tool. There is no public-policy rationale for subsidizing the premiums of high-risk drivers with a history of at-fault claims and/or infractions,” said Aaron Sutherland, IBC’s Pacific and Western vice-president.
“This is unfair and works against the very thing the government should seek to encourage safe driving.”
The IBC suggests that the grid system, first put in place in 2004 to help new drivers access affordable premiums, should be removed or “substantially reformed” to help reduce the number of drivers who the system was not designed to help.
To read the full report, click here.
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