Understanding Alberta’s New Plan to Reward ‘Good’ Drivers

New Alberta Auto Insurance Reforms

The Alberta government announced earlier this month a new plan to improve the affordability of auto insurance in the province.

The purpose of the plan is to implement some short-term reforms to address the affordability of auto insurance in the province in response to rising premiums. The short-term reform getting the most attention is the intent to reward ‘good’ drivers by capping their auto insurance rate increase on renewals at 3.7%.

Always a hot topic among Alberta drivers, the rate increase is indexed annually for inflation and is tied to Alberta’s Consumer Price Index.

Our personal insurance advisors have dug deeper into the government’s new plan to provide greater clarity on what Alberta drivers can expect when this plan goes into effect in 2024. They also offer their expert advice on five ways that Alberta drivers can protect their premiums.

Acera Insurance Answers Your Good Driver Questions:

Q: What is the definition of a ‘good’ driver?

A: The Alberta government’s plan defines a ‘good’ driver as someone who, as of their auto insurance renewal date, has:

no at-fault accidents in the past six years
no criminal traffic convictions in the past four years (i.e., impaired driving)
no major traffic convictions in the past three years (i.e., distracted driving, speeding in a school zone or playground zone, speeding over 50 km/h over the posted limit)
no more than one minor traffic conviction in the past three years (i.e., speeding, failing to stop or yield)

Photo radar tickets are not factored into the definition of a ‘good’ driver.

Q: I thought a driver’s record was always factored into their premium; how is this any different?

A: Insurers consider several factors, including driver behaviour, when calculating each individual’s auto insurance premium — this has not changed.

What is new is the maximum increase that an insurer can apply to an auto insurance premium upon renewal; under this new plan, the increase for ‘good’ drivers cannot exceed 3.7%.

Q: Does the ‘good’ driver cap only apply to basic mandatory auto insurance coverages, or does it also apply to optional coverages (collision, comprehensive, loss of use, etc.)?

A: The ‘good’ driver cap applies to the total premium and is inclusive of all coverages if they’ve been on your policy since your last renewal. If you’ve added coverages since your last renewal, the rate cap won’t apply until your next renewal.

Q: Does the ‘good’ driver cap apply to all motorized vehicles?

A: No. The Alberta government’s plan clearly states the ‘good’ driver cap only applies to private passenger vehicles. This means insurance policies for motorhomes, ATVs, snowmobiles and motorcycles are exempt from the ‘good’ driver cap.

Q: I was recently involved in an at-fault accident, but I have the accident forgiveness endorsement on my auto policy — do I still qualify for the ‘good’ driver cap?

A: No. Any at-fault accident in the past six years will disqualify you as a good driver, per the Alberta government’s definition.

However, while you would not qualify for the 3.7% cap, the accident forgiveness endorsement means your insurer will not be able to factor your first at-fault collision into your premium calculation upon renewal.

Q: Even if an individual qualifies as a ‘good’ driver, are there any instances where their auto insurance premium increase may exceed the 3.7% rate cap?

A: First, it’s important to understand that the ‘good’ driver 3.7% rate cap only applies to renewal premiums. As such, choosing to shop for an auto insurance policy with a different insurer may result in a higher rate increase.

Additionally, a premium increase may exceed the 3.7% cap a for a ‘good’ driver if they have moved, changed vehicles, or make any changes to their policy upon renewal, such as but not limited to:

adding a new driver (if this driver has a worse driving record or poses a higher risk than the policy holder, premiums could increase)
changing coverage (for example, adding optional coverages such as collision or comprehensive, increasing the third-party liability limit or lowering the deductible could result in a higher premium)
losing a discount (for example, you no longer have a multi-vehicle policy)

Lastly, Alberta drivers should be aware that some insurers have previously approved higher rate increases that will not expire until later in 2024, which nullifies the ‘good’ driver rate cap.

For example, say an insurance company has a previously approved rate increase of 4% that remains active until March 31, 2024. Even ‘good’ drivers who renew their policy within the first three months of the year would be subject to a rate increase of 4% instead of 3.7%.

Q: What kind of rate increase can be expected for drivers who are not deemed ‘good drivers’?

A: This is a complex question as premiums are extremely situational; it will depend on why a driver doesn’t qualify for the ‘good’ status (i.e., has an at-fault accident) as well as how each insurer rates driver behaviour (i.e., traffic convictions).

If you have questions about your auto insurance premium and rate increases, please contact your insurance advisor — they’ll be able to provide greater clarity for your specific situation.

Q: How long will the ‘good’ driver rate cap be in effect?

A: It is anticipated that the ‘good’ driver cap will go into effect Jan. 1, 2024, and remain in force until the Alberta government rescinds it.

Q: Will the rate cap apply to all coverages?

A: The rate cap applies to all coverages that have been on your policy since your last renewal. If you’ve added coverage, the rate cap won’t apply to the new coverages until your next renewal.

Ways to Lower Your Auto Insurance Premiums in Alberta

Following the rules of the road continues to be a primary way to secure a lower auto insurance premium. But there are some additional ways you may save on your policy:

Add the accident forgiveness endorsement. While this will add a nominal cost upfront to your policy, it goes a long way in protecting your premium in the long run. Mistakes happen, but with this endorsement, your rates cannot go up in response to your first at-fault or partially at-fault collision.
Bundle to save. Bundling several policies with the same insurer often results in a cost savings. Consider bundling your home and auto insurance, or vehicles if you have multiple within your household.
Increase your deductible. Consider the amount you would be comfortable paying out of pocket in the event of insured loss; if it’s higher than what you currently have listed as your deductible on your policy, upping the amount can help lower your premium.
Let us shop around: Contact your insurance advisor prior to your renewal as Acera Insurance has access to the top auto insurance providers, each of whom has a different model for pricing premiums. While you would not qualify for the ‘good’ driver cap, we may be able to find you an even better deal with a different insurer.

Did you know Acera Insurance also offers group insurance programs to our commercial clients? If you have a commercial insurance policy through us, contact our team to learn more about setting up a group insurance program for your business, which will provide you and your employees with discounts on home and auto insurance.