Understanding Alberta’s New Plan to Reward ‘Good’ Drivers
New Alberta Auto Insurance Reforms
The Alberta government announced further auto insurance reforms on Nov 21., 2024, in its ongoing attempt to improve the affordability of auto insurance in the province.
The reform getting the most attention is that the ‘good driver’ cap will increase to 7.5% as of January 2025, up from the current 3.7%.
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 2025. They also offer their expert advice on five ways that Alberta drivers can protect their premiums.
Acera Insurance Answers Your Good Driver Questions:
A: The ‘good’ driver cap was 3.7% in 2024. The Alberta government has increased the ‘good’ driver cap to 7.5% in 2025 and 2026.
This means, if you meet the definition of a ‘good’ driver, your auto insurance premium increase may be capped at 7.5%, whereas your increase would’ve been capped at 3.7% in 2024.
A: Some insurers could not implement the Alberta ‘good’ driver rate cap until the summer or fall of 2024, meaning clients who renewed earlier in the year did not benefit from the 3.7% cap.
The good news is that the Alberta Automobile Insurance Rate Board will prohibit insurance companies from adopting the new 7.5% ‘good’ driver rate cap until 12 months after they’ve implemented the 3.7% cap.
This means, if you were eligible for but did not receive the 3.7% rate cap in 2024 due to your insurer’s implementation timing, your auto insurance premium increases will be capped to 3.7% in 2025 (so long as you still meet the ‘good’ driver criteria).
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).
The Alberta Automobile Insurance Rate Board has implemented that insurance companies’ overall auto insurance rate increases must be capped at 10% in a 12-month period. But insurers can decide how to divide this total 10% limit among their clients — meaning non-good/bad drivers in Alberta could see a premium increase higher than 10%.
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.
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.
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 7.5% in 2025 and 2026.
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.
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.
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 ‘good’ driver 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.
A: First, it’s important to understand that the ‘good’ driver 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 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)
A: It is anticipated that the ‘good’ driver cap will remain in force until Jan. 1, 2027.
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.
A: The Alberta government introduced its intent to move to what it’s calling a ‘care-first model’ by January 2027.
The intent of this model is to provide injured Alberta drivers with greater financial benefits to aid in their full recovery.
Where medical and rehabilitation benefits are concerned, the current Alberta model limits these to $50,000 for two years. The move to the ‘care-first model’ will change these to unlimited benefits over a driver’s lifetime.
Where the income replacement benefit is concerned, the current Alberta model pays the lessor of $600 per week or 90% average gross earnings for up to two years. The move to the ‘care-first model’ will see the maximum insurable gross yearly income change to $120,000, which will be payable until you turn 65.
Another component of the proposed ‘care-first model’ is that Alberta drivers will only be able to sue at-fault drivers in certain cases — such as if the driver is convicted of a major offence, like impaired driving or dangerous driving. In most other cases, at-fault drivers cannot be sued but will be held accountable through higher auto insurance premiums.
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 can protect your auto insurance premiums in Alberta:
- 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.