A new report from the Montreal Economic Institute has found that government-imposed rate caps on Alberta’s auto insurance are reducing consumer choice and weakening market competition, despite intentions to protect drivers.
The Insurance Bureau of Canada released findings Tuesday showing that 35 insurers lost money on auto insurance sales in 2024, contributing to a record $1.2 billion industry loss. Alberta’s Superintendent of Insurance reported that insurers paid out 18% more in claims and expenses than they collected in premiums.
The Montreal Economic Institute, an independent think tank, concluded that price controls on auto insurance send “anti-market signals” that reduce consumer choice and undermine long-term affordability. The organization found that when premiums cannot reflect real-time risk and costs, insurers often respond by restricting coverage, tightening underwriting, or leaving the market.
Since 2017, Alberta insurers have faced multiple rate interventions. The government imposed a 5% rate cap between 2017 and 2019, followed by a full rate freeze in 2023, a 3.7% “good driver” rate cap in 2024, and a 7.5% “good driver” rate cap in 2025 continuing into 2026.
Three carriers have exited the Alberta market, forcing tens of thousands of drivers to seek coverage elsewhere. Many drivers now have fewer choices and less tailored coverage, according to Hanna Beydoun, director of auto policy at the Insurance Bureau of Canada.
“Alberta’s continued rate intervention has made the province an unattractive market for new auto insurers,” Beydoun said.
Brokers have reported that drivers are increasingly unable to secure even mandatory coverage as some insurers scale back offerings or withdraw, raising concerns that more drivers could end up underinsured or paying out of pocket for certain benefits. Another insurer has announced it will leave the Alberta market in 2026, continuing a trend of carriers exiting due to financial and regulatory pressures.
Meanwhile, grassroots members within the governing United Conservative Party have signalled resistance to aspects of the province’s planned Care-First auto insurance reforms, particularly over limits on legal access, adding political uncertainty to the market.
Nationally, auto insurance premiums continued to rise into 2026, with Alberta among the provinces experiencing year-over-year increases. This broader backdrop underscores that while provincial regulations are a key factor, cost pressures affecting drivers and insurers extend beyond Alberta.
The Montreal Economic Institute report noted several cost pressures that rate caps cannot eliminate. Legal costs have grown 34% and are projected to grow 8.7% this year. The cost of delivering care and recovery benefits to collision victims has increased roughly 25% and is projected to grow nearly 12% this year. Auto theft costs are up 21%. The Alberta government has increased the health levy on auto insurers by 70% during the three-year rate intervention period.
Accounting firm MNP documented similar harms in September 2024, finding that premiums increased 12% over 18 months under the rate freeze and cap. Drivers outside the “good driver” definition saw premiums rise by an average of 15% annually.
The firm found that young and new drivers are disproportionately affected by high prices and reduced coverage availability. Drivers who switch insurers may lose “good driver” status, and many fall outside the rate cap for reasons unrelated to driving behaviour.
Alberta plans to implement Care-First auto insurance reforms in January 2027, promising faster access to care and recovery supports after collisions.
