{"id":22517,"date":"2024-09-24T19:29:11","date_gmt":"2024-09-24T19:29:11","guid":{"rendered":"https:\/\/www.insurance-canada.ca\/?p=81759"},"modified":"2024-09-24T19:29:11","modified_gmt":"2024-09-24T19:29:11","slug":"cost-of-record-breaking-hailstorm-adds-to-crisis-facing-alberta-auto-insurance-system-ibc","status":"publish","type":"post","link":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/2024\/09\/24\/cost-of-record-breaking-hailstorm-adds-to-crisis-facing-alberta-auto-insurance-system-ibc\/","title":{"rendered":"Cost of record-breaking hailstorm adds to crisis facing Alberta auto insurance system: IBC"},"content":{"rendered":"

$900 million in unexpected claims, alongside a rate cap, may contribute to insurers leaving Alberta<\/h3>\n

Calgary, AB (Sept. 19, 2024) \u2013 Insurance Bureau of Canada (IBC) is warning that the massive volume of auto insurance claims from the recent Calgary hailstorm could create an economic environment that may push even more insurers out of the province due to the rate cap.<\/p>\n

The August 5 hailstorm is now the second-largest insured loss event in Canadian history. It caused roughly $2.8 billion in insured damage<\/a> and 130,000 insurance claims. Over half of those claims \u2013 about 70,000 of them \u2013 were for damage to vehicles; it\u2019s estimated that auto damage claims alone cost $900 million.<\/p>\n

\u201cThe Calgary hailstorm will add $900 million in unexpected claims cost pressures at a time when Alberta\u2019s auto insurance system is in crisis due to the province\u2019s rate cap,\u201d said Aaron Sutherland, Vice-President, Pacific and Western, IBC. \u201cUnder the rate cap, auto insurers are unable to recover from the growing cost of claims over the past two years. This has created a dire economic environment that has forced several companies to leave Alberta\u2019s auto insurance market, limiting competition and choice for consumers. Unless the rate cap is removed, the high number of new claims from the hailstorm will contribute to Alberta\u2019s already tenuous market conditions, which may result in more insurance carriers making a similar exit from the market.\u201d<\/p>\n

Prior to the hailstorm, auto insurers had already paid out more in claims and expenses in 2024 than they had received in premiums. This led to a stark warning from Morningstar DBRS<\/a>, a leading credit rating agency. It stated:<\/p>\n

\u201c[A] handful of insurers have left over the past five years. We believe that others may follow. Even those who do not have plans to withdraw from the market per se may be implementing cost savings measures that are reducing the accessibility and availability of auto insurance, given the lower relative profitability of the Alberta auto product and its uncertain future.\u201d<\/i><\/p>\n

The significant, unexpected cost of the Calgary hailstorm exacerbates the risk of carrier withdrawal due to the rate cap and is a clear example of why it\u2019s urgent that the government remove the rate cap to restore competition and choice for consumers. If more insurers leave the Alberta market, affected consumers will be forced to find new, typically more expensive coverage elsewhere. This is a key reason why insurance premiums have risen 12% over the past two years despite government rate interventions.<\/p>\n

Alberta\u2019s auto insurance system is facing significant cost pressures, all of which are growing well in excess of the government\u2019s 3.7% rate cap. Over the past two years:<\/p>\n