Why Are Insurance Rates So High In Alberta?

Why are Albertans paying so much more for insurance, and is there any relief in sight? 

Carlin Lutzer sits down with local insurance broker Brayden Vellenoweth to unpack the complex forces driving insurance costs across Alberta. From devastating hailstorms, floods, and wildfires to rising litigation expenses and vehicle repair costs, Brayden explains why premiums continue to climb and why insurance is about far more than finding the cheapest rate. 

The conversation explores Alberta's upcoming Care-First auto insurance reforms set for 2027, the impact of natural disasters on insurers, misconceptions about good drivers subsidizing bad drivers, and the importance of understanding insurance as a personal financial risk management strategy. 

Whether you're a homeowner, driver, business owner, or simply frustrated by rising premiums, this episode offers practical insights into how insurance really works and what Albertans can expect in the years ahead.

Listen For:

:06 Why Does Alberta Have Some of Canada's Most Expensive Insurance Rates?

6:41 How Have Alberta's Natural Disasters Reshaped the Insurance Industry?

13:05 Why Are Legal Costs Driving Auto Insurance Premiums Higher?

32:48 What Will Alberta's New Care-First Insurance Model Change in 2027?

45:58 Is Insurance Really a Requirement or a Personal Financial Strategy?

Guest: Brayden Vellenoweth  | LinkedIn 

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Transcript

Announcer (00:00):

Welcome to another episode of the Okotoks Podcast, brought to you by Carlin Lutzer Real Estate, your local connection.

Carlin Lutzer (00:19):

Today we're diving into a topic that affects every single one of us, whether you own a home, drive a vehicle, run a business, or simply pay insurance premiums every month. It's insurance. Joining me today is local Okotoks’s insurance broker, Brayden Vellenoweth As a broker, Brayden works with multiple insurance providers to help clients find the right coverage for their specific needs, not just the cheapest price. We talk about why insurance rates in Alberta continue to rise, how natural disasters like hailstorms, floods, and wildfires are impacting premiums. The proposed changes coming to Alberta's auto insurance in 2027 and what consumers can do better to understand their coverage. One topic we didn't have time to get into during the conversation was the value of a dash camera. Speaking from personal experience, if you're driving regularly, a dash camera may be one of the smartest investments you can make.

(01:22):

In a world where insurance claims can become a matter of one person's word against anothers, having video evidence can help protect you, speed up claims, and provide clarity when accidents happen. They're relatively inexpensive compared to the financial and emotional headaches they can potentially save. Whether you're frustrated by rising premiums or simply want to better understand how insurance works, I think you'll find this conversation informative and eye-opening. Here's my conversation with Brayden. Brayton, thank you for joining me.

Brayden Vellenoweth (01:56):

Yeah, thanks for having me.

Carlin Lutzer (01:57):

For sure. Now this is a hot topic and you're a brave man and the reason why I say you're a brave man is because I've asked a lot of people to come on my podcast and talk about insurance and there's some people that would walk me down the garden path a little bit and then they'd be like, "Oh, okay, well, I talked to so- and-so or other insurance companies basically don't want to come out there. So this is awesome." But you are a mortgage, sorry, not a mortgage broker, you are an insurance broker.

Announcer (02:29):

Yes.

Carlin Lutzer (02:30):

Yes. And that's the beauty of it because when someone comes to you, you try to find them the best, obviously not just the best rates, but the best insurance provider for their needs, right?

Brayden Vellenoweth (02:46):

Yeah. We just like to say it's like the best policy at the best value point because as soon as you start talking about only price or anything like that, it's a very in- depth and unique item for each individual and their own risk appetite. So the main thing there is that our goal is to make sure that people are covered adequately for what they need and find them good value.

Carlin Lutzer (03:20):

Right. Because just because it's the cheapest rate that you can find doesn't mean that when you ... Sometimes I've known people that have gone through some insurance issues and they find out that their insurance provider isn't that great because they didn't really read all the fine print and they're fighting with their insurance company to get compensated for a flood or whatever based on ... So it's not necessarily always about the best rate, right?

Brayden Vellenoweth (03:52):

No, no, not even close. And I mean, it just is as easy as to say most people's auto insurance could be cheaper if they removed coverage. Is that a good idea? Maybe, maybe not. But it's not about price, it's about the total value of the package. For sure. And there's a lot of facets that go into that.

Carlin Lutzer (04:19):

Yeah. Well, here in Alberta, we certainly have some issues with insurance because the insurance rates have skyrocketing. It feels like now do we now officially own the title of the most expensive insurance in Canada or is Ontario still kind of ...

Brayden Vellenoweth (04:40):

Yeah, I mean-

Carlin Lutzer (04:42):

Neck and neck.

Brayden Vellenoweth (04:43):

To start off with here, I do want to say obviously there's some numbers and facts that I have that are publicly available, but there's also going to be opinions and that's kind of my insight. All those opinions, they're mine as my own. They don't represent any other entity including my employer or any of the carriers that I work with. I am a licensed insurance broker, but I'm not your broker. So nothing here today should be taken as insurance advice for your specific situation and you should go to your broker if you have those detailed questions. Everything that I'm going to discuss is just for informational purposes only and doesn't imply any kind of fiduciary or agent-based relationships. Absolutely.

Carlin Lutzer (05:23):

It's a little disclaimer there right out the gate.

Brayden Vellenoweth (05:25):

No, fair

Carlin Lutzer (05:26):

Enough. Yeah.

Brayden Vellenoweth (05:28):

But your question, like Ontario, Ontario's pricey and they've got some metrics and some rationales behind that. Obviously they've got a lot of people and they've got high density and they've got large buildings. If we're looking at areas like Toronto, there's a significant density there and density, I mean the whole point of risk is that ideally you want to spread risk out. And it's very, very hard to do when you've got a very dense city with a lot of value there, a lot of vehicles, a lot of people, a lot of buildings. So Ontario, I would say is definitely also in a bit of a tough spot depending on what specific type of product you're looking at. But Alberta, yeah. I mean, we might not have the absolute density that Ontario does in some of their areas, but we're a little spread out. But at the same point, Alberta's got really bad natural disasters and that's got a huge impact on what our overall insurance landscape looks like.

(06:41):

This is kind of a stat that has consistently been true for the last little while and this is kind of crazy, but if you look at the top 10 most expensive natural disasters as far as insurance losses and what insurance has paid out in Canadian history, okay, the top 10 Alberta has five of those and of those five, we have position number one, two, five, six and seven. Oh,

Carlin Lutzer (07:15):

Is that right? Okay. Yeah.

Brayden Vellenoweth (07:16):

So pretty high up there. And this list years ago, let's say even five, six years ago, would have included the slave lake fire, like the slave lake fire in 2011, I believe. That was the second cost latest natural disaster in Canadian history as far as insurance laws are paid out as far as inflationary adjusted numbers. It doesn't even crack the top 10 anymore. So when we go beyond the top 10, Alberta's still ringing in with some big numbers, but it just shows the severity and frequency of these natural disasters is on an increasing basis. And if we're looking at what happens in other provinces, well, BC, we've heard about the atmospheric river that they have. I think I've had a couple of them the last few years, right? So they have water damage and obviously there's fire there as well, but we don't really see too, too much of fire completely raising medium sized towns.

(08:17):

Some houses in Kelowna or you've got some smaller towns where, but it's nothing like Jasper got taken out or Slave Lake got taken out or Fort Mac got taken out, which is still the costliest natural disaster by insurance losses and Canadian history. And you look at Ontario and they've got a lot of water related issues as well. Ice, water, flooding, even kind of like hurricanes, that kind of thing. It's all water related, but we've got the whole gamut here. We've got on this top 10 list, we've got two hail storms, we've got two wildfires and we've got floods where we have consistent natural disasters of a wide variety and it's going to like over time it really has an impact.

Carlin Lutzer (09:10):

Right. And the provincial boundaries kind of depict insurance rights. So like just because a natural disaster happened in Alberta, it doesn't mean that insurance rates necessarily go up because of those disasters in BC. Is that correct?

Brayden Vellenoweth (09:28):

To a point, yeah. I mean, for personal insurance, that's generally pretty accurate for sure. Commercial insurance does have a bit more of like a global reinsurance aspect to it. So for commercial insurance policies and carriers, they often have reinsurers where there's a number of ways this can play in, but if the reinsurers globally are having a good year, then we might see rates for our commercial policies here in Canada diverge from what we're seeing happen in the personal space, which is happening right now. The commercial space in 2025 really, really softened and we saw significant competition come back into the marketplace, which we hadn't seen for nearly a decade. And on the flip side, you've got the next building over is a house and those rates are going up, right? There's definitely a bit of a divergence in those.

Carlin Lutzer (10:35):

Right. So yeah, obviously there's not much that we can do when it comes to natural disasters and obviously we're all pooling. It's like a co-op. We're pooling our money together to help people in need and that's certainly could be argued that that concept isn't fair and then other ways, because I know that I've gone through some insurance claims and certainly grateful that I didn't have to pay for my truck that was stolen out of my driveway here in Okotoks. Grateful for the insurance program, but knowing that we have as we grow, even here in Okotoks, we're going to grow, our target then becomes bigger for hailstorms, for natural disasters. So just because I'm now, let's say I know certain parts of Calgary, the insurance rates are higher because it's a hailstorm alley, right? And you just have to pay for because of the proximity to the chances of being hit.

(11:38):

I think now currently touchwood and Okotoks or hail insurance rates are a little bit not as crazy or our home insurance rates aren't as crazy because we haven't been hit that dramatically with a hailstorm, right? But as we grow, we get bigger, target becomes bigger. All of a sudden we're all lumped into that same type of thing. So no, because right now all of Canada is kind of feeling that pinch, right,

(12:03):

A little bit?

Brayden Vellenoweth (12:04):

Yeah. I mean, it does very much depend on where you're at too, right? I mean, when I started in the industry, you get people moving here from BC and they'd come in for auto insurance and they go, "Oh my God, this is so cheap. I was paying double in BC."

Carlin Lutzer (12:21):

NBC. Okay, that's interesting because I thought ... When was

Brayden Vellenoweth (12:25):

That? 2015 or so.

Carlin Lutzer (12:26):

Okay.

Brayden Vellenoweth (12:27):

And now they come in from BC and they go, "Oh my God, why is it more expensive than what I was paying? I heard Alberta was cheaper for auto insurance." So things change over time and that's where you kind of get into, there's different models for insurance as well.

Carlin Lutzer (12:41):

Because BC's ICBC, right? They have their provincial government led insurance program over east in Saskatchewan, same thing, right? They have SGI, they're covered by the provincial government. So is it because the rates are different or has that no-fault insurance come into play in both those provinces?

Brayden Vellenoweth (13:05):

Yeah, this is the area where, I mean, I don't have very clear line of sight, but the system that we operate in here is a tort model and that means that when their losses occur, there is some aspect that we have accident benefits coverage for, but there's limitations to that. And as soon as something goes outside of the scope of that, then there has to be a tort against a third party and that goes through the legal system. So these other provinces have a different system for adjudicating payouts and that's the big difference between the systems. Yeah, there's obviously a lot more to it than that, but that being said, what we've seen in Alberta for auto insurance in the last couple of years is a significant increase in litigation costs and that portion of the total overall claims paid out for auto insurance, that portion that is that legal cost is growing and growing.

(14:17):

And so it's a bigger slice of the pie, but the pie's also getting bigger, which is driving rates up, right?

Carlin Lutzer (14:26):

Well, we've also seen a lot of lawyers move to Alberta for the very reason, because hasn't there been like-

Brayden Vellenoweth (14:32):

There's a change in BC.

Carlin Lutzer (14:33):

There's a change in BC. So we're having BC lawyers move here for now.

Brayden Vellenoweth (14:40):

So yeah, a couple years back, they changed their system. And again, this is where I'm not 100% sure on the fire details, but my understanding is that there was a change in BC as far as what was classified as a tort and what was just going to be covered underneath the base wording of the policy and it eliminated a lot of the need to sue. And so yeah, I don't know about you, but I listened to the radio. I've heard a lot of ads for injury lawyers in the last couple of years that I didn't hear about a decade ago.

Carlin Lutzer (15:16):

Yeah. It's almost like it became like when you travel down to the States or you're watching an American channel or whatever the injury, but now we certainly do have our fair share. Does Ontario have that same policy where you

Brayden Vellenoweth (15:29):

Could- Yeah, they've got a tort system as well. It's very similar to Alberta.

Carlin Lutzer (15:34):

Yeah. And I know that there's some pretty strong feelings on both sides of that. Obviously it would drive the cost down of insurance going to no fault.

Brayden Vellenoweth (15:47):

I mean, there's a lot of different ways to do that as well. I mean, there is some provinces have what could be classified as no fault. Some provinces have a bit more of what's a still fault is still applied. It's just like where the coverage for the accident benefits comes from,

Announcer (16:10):

Right?

Brayden Vellenoweth (16:11):

So I don't know, to me, I look at it and I go Saskatchewan, Manitoba, they've historically had significantly lower pricing than we have here in Alberta for their auto insurance and they've got a different system than we do. So it's easy to point the finger and say like, "Hey, it's just the tort system that's causing that. " But again, talking about what we said earlier, there's obviously significant pressure from natural disasters in Alberta. We see higher theft rates for auto insurance as well in Alberta. We've got more density in Alberta. We've got density up north in Grand Prairie and Edmonton and in Calgary and in Lethbridge. And you look at where's Manitoba's density? Well- Winnipeg. Winnipeg. That's it. And the number of people, we've got more people here. I think that there's a lot of aspects to it. That's what they're looking to amend with the CareFirst changes that they're looking and they're hoping to, that it'll result in lower premiums, which I'm hoping for the same thing as well.

(17:21):

I mean, it makes sense to me why if you're cutting out a lot of legal expense, if you can just remove that completely or nearly it would seem to lower rates, but I mean, we'll have to see how that actually works out. Yeah,

Carlin Lutzer (17:37):

For sure. Obviously there's so many people that can use it. We've all seen it on Instagram locally, like in Calgary, people pull into a parking lot, they notice that someone's behind them, all of a sudden the guy in front jams on their brakes, pops out of his car, holding his neck, "Oh, my neck's hurt." Yeah, they're looking, there's so many things and it's hard to weed out what's fraud really and what's legitimate. But somebody wrote in the Calgary Herald years ago, and I'm just going to read this because I think you'll find this fascinating. And she wrote that forcing careful drivers to subsidize high risk drivers through flat rate style insurance models simply wasn't fair. Her position back then was clear. People who caused accidents should pay more and good drivers shouldn't be punished for the mistakes of others. Do you know who wrote that?

(18:40):

Danielle Smith. And now she's kind of reverting a little bit back on that with some of the changes that she's planning on making and given basically, because we're, what's it called? We're on the grid system right now, even when it comes to

Brayden Vellenoweth (18:56):

Insurance,

Carlin Lutzer (18:58):

Even the good drivers are paying for the bad drivers. It'd be nice if we could get rid of that, right? If there was ... You disagree?

Brayden Vellenoweth (19:05):

There is a fundamental issue to that line of thinking and it's that you don't know who or when, who's going to be impacted by a claim and when. So let's say you and I and our 15 neighbors create an insurance company. That's how the first insurance companies were created. Similar people, I mean, that's how some of the big Canadian ones made. Most people have heard like Wawanesa Mutual, that started farmers banding together to share costs. And as of today, right now, none of us have had a claim. None of us have had to make ... We're perfect, right? We started this yesterday. There's been no claims. So let's say this all works fine for three years and then down the street, Bob, out of our 15 neighbors, he's the first one to have a claim. His house burns down. Well, can we really say that we don't want to pay for ... We've been putting all this money together and we've been pooling it, right?

(20:07):

And then Bob has a house fire and wipes us all out and now we're like, "Oh my God, we have no money left. Our reserves are basically depleted, but we didn't have the claim. So I want to still keep paying $1,000 a year for my house insurance and so do you and so does our neighbor." And we all get together and we think, "Ah, well, you know what, Bob, you should be paying $8,000, $20,000 because you have the claim, you should be paying all of this money back." And so to say that we ... And then what happens next year? Well, then I have a claim. Well, has it been fair that I haven't been paying? So I think in principle, yes, when a claim occurs or losses occur and people utilize their insurance, we need to have appropriate rating algorithms to ensure that they aren't receiving as good of a pricing structure as those that don't make claims.

(21:08):

I agree, but ultimately it's still a pool. And the fact is that we're existing together in an area where the risk is and it's just there's chance. There's chance of things happening. A hailstorm, maybe it hit Northeast Calgary last year and maybe it's going to hit it again the year after. And that means that probably they're an area that should be rated more aggressively for hail and that's what the insurers are doing. But does that mean that it can't hit us in Okotoks the year after that? No, it doesn't, right? So it still needs to be priced in because we still operate in the same general area. Here's a really good one that I like to use. You're driving to work and you've got a perfect driving record. You're 50 years old, never had a claim in your life, never had a ticket, never had an accident, but you're the guy that's driving at that point in time through your in light and someone comes and T-bones you.

(22:11):

They run a red light. They're completely at fault. Did you do anything wrong?

Announcer (22:18):

No.

Brayden Vellenoweth (22:19):

By the fact that you were driving your vehicle, did you add a risk element to the roads that day? Had you not been driving, you would've added no additional risk. So you can be a good driver, you can be doing everything correctly, but the sheer fact that you're existing on the roads means that you've added a risk element to the roads that day and that needs to be priced in somewhere. I agree. The other guy, bad driver shouldn't have done that, shouldn't have run red light. I agree his rates should be bad. I mean, personally, my stance is that I don't think that we spread the spread between good and bad isn't far enough. I think that it should be worse as well. So I do agree with that, but we cannot get away from the fact that simply by you being on the roads, you've added an element of risk to the

Carlin Lutzer (23:17):

School. I hear what you're saying for home insurance, natural disasters and everything, but if somebody has a pretty crazy record of being a bad driver, I don't think that person should be covered by the rest of the people. I understand having a few grace accidents, maybe one every five years or something, some kind of grace period where it's like, "Yeah, you get to get me. You got a good record, you screwed up." And I think my insurance company does provide for that, which I'm very grateful for, but do you know what I mean? Where it's somebody-

Brayden Vellenoweth (23:55):

And there is

(23:59):

A structure that that does exist in. So in Alberta, because there's no singular provider, it's a private system with lots of insurance carriers. If you sell auto insurance as an insurance carrier in Alberta, you must offer coverage, you must offer liability coverage to everyone. Unless the driving record is bad enough, then you go to a specific pool. It's called Nordic, it's called the facility market. And all of these drivers that are really, really bad, you have to actually qualify by being bad enough to get into the facility market. And then once you're there, that's one of the very few reasons why the insurance carriers can say, "No, we actually aren't going to provide coverage for you. We're not going to write your business." And we can say that. Whereas if you or I have a decent driving record and we go, "Hey, I want an insurance policy," they have to give us at least a basic auto insurance policy.

(25:06):

So the facility market's there, the rates are significantly worse there than outside of it. It is kind of a pool for the bad drivers. How that is funded is that obviously all of the premiums are paid there and then any overages from the losses, any auto insurance carrier that operates in Alberta has to provide ... It's based on a proportional metric to how much business they do, but they also have to provide funds to make sure that there's a net ... It zeroes out in balances at the end of the year from my understanding. So these people are paying generally for the majority and they are in their own pool of sorts. There's still some overage there, because yeah, I don't disagree though. From what I've seen, I do think that the rates should be worse. I don't think the rates go far enough for drivers that are bad.

(26:06):

I'm completely on board with that. I just think that the argument that people that don't have losses shouldn't have to subsidize those that do. That is fundamentally at odds with the concept of insurance, full stop. Right.

Carlin Lutzer (26:20):

Yeah. And you look at kids, because we just went through that with my oldest that we're just getting her car insurance and her out on the road and that was a shock to the system, right? And I think

Brayden Vellenoweth (26:34):

We could

Carlin Lutzer (26:34):

Have got by if we just had two vehicles on the house, but then we have three and then now all of a sudden-

Brayden Vellenoweth (26:39):

Primary operator. ...

Carlin Lutzer (26:41):

We are flagged. So it was certainly a sticker shock, but I just wish the insurance companies could ... Well, you also look at vehicles these days and all the computers and all the mechanisms and you get into a little fender bender or something that looks like, okay, that was nothing, but then you end up breaking a sensor or braking or God forbid you break a headlight. My gosh, it's just like there needs to be some kind of ... Yeah, in my opinion, the vehicles are completely ridiculous. The building, the way that we're building houses these days, Brayden,

(27:23):

With the siding, the vinyl siding that will crack at a ... I know it's more expensive, but why don't we start looking at the Hardie board and you think of how insurance rates in the long term, okay, we're putting a little bit more money into the initial build, but maybe on the prevailing side that is going to get hit by hail, we're using a different product than the cheap vinyl siding that A goes up very quickly and fires and cracks in a heartbeat with a hailstorm, right? Yep. Also, when it comes to floods and stuff inside the house, I think in the building codes, I love it when I see when there's a washer and a dryer up on the second level of the house, that there's a drain that will drain into your utility room so you, "Oh my gosh, we got a drain." It would be so cheap if we could put that in under every appliance that has a refrigerator or a sink that, okay, we've got to leak somewhere in the house, we've got to find it because my floor in my utility room's wet as opposed to, "Okay, my ceiling's now

Brayden Vellenoweth (28:28):

Screwed."This is my soapbox. I'm a big building science guy. I don't know if you've heard of the whole concept of building science, but just building things in a smart, effective manner. So this is near and dear to my heart and it's like it's got a very good, strong intersection with insurance. We just built a house, we moved in last year and I did that. We've got second floor laundry. I had a drain put in because I'm like, "Why would I not do that? " And I also had a long list of things that I wanted to do as well and a lot of them were denied, right? By the builder. By the builder. Who's

Carlin Lutzer (29:12):

The builder? No, I'm joking. Disclaimer, disclaimer, find out later.

Brayden Vellenoweth (29:18):

So a lot of places, if we're talking like Calgary or Okotoks or in town, a lot of these are the developments are done by big developers and then the building is done by production builders, spec builders. There's not a lot of customization. If you want a custom house, I'm sure you can find a builder, but now we're talking like rural properties for the most part, unless you're doing infill. So the vast majority of homes that are being built these days are by production builders and they're looking to build homes fast and that's fine and they're not at fault for that. But yeah, I completely agree. Is our building code where it should be at? I don't think so at All not even remotely close. And the thing in Canada is that we've got a Canadian building code, but each province has their own provincial building code.

(30:11):

Well, the Canadian building code takes a while to update and it's behind by a couple years. And then once the Canadian building code is there, then the provincial building code goes, okay, well, what does Canada say? Oh, well, they say this and takes them a couple of years. So everything's very, very slow moving. But yeah, I agree.

(30:32):

We aren't building homes as good as we should be. I asked, I said, "Hey, I want to put a metal roof on. I'm in the insurance industry. In Alberta, I know what an asphalt shingle roofs do when it hails out. I want a metal roof." Well, the architectural controls for our entire area say, "You can't do any kind of roofing except for asphalt shingles." So the builder can't put those on for me. Well, I said, "Hey, I don't want vinyl siding. I want to do cement fiber." Well, that was a $60,000 upgrade above and beyond the included cost of my vinyl. So now we're talking for the base house price, it's a significant portion, like double digit percentage increase in cost. So it's like, does that make sense for me? Probably not. On the insurance side of things as well- It

Carlin Lutzer (31:23):

Does. Yeah. You're never going to get the value back in your house for-

Brayden Vellenoweth (31:26):

Are you going to get the value back from your insurance premiums? No. So I also don't think that the insurance carriers are incentivizing enough. So we're in this weird thing where the cheapest for everyone today is just to keep doing what we're doing, but it's just like that saying, the best time to plant a tree was 20 years ago and second best time is today. It's the cheapest option today to keep putting them on vinyl siding and asphalt shingles, but in 20 years we're going to be like, "Why don't we have a code change or 20 years ago or even now? Why are we still putting asphalt shingles on? " But then you also have the people. You and I are sitting here having this conversation thinking about this thing, but a lot of people just want the nice quartz countertops and they don't really even consider what their exterior siding materials because that's just not something of value to them.

Carlin Lutzer (32:25):

No, it's certainly the lipstick that is the value. It's not the upgraded furnace. It's not the insulation, it's not the Hardie board siding or whatever. You're right. Well, yeah, you don't get your value back for those things.

Brayden Vellenoweth (32:41):

No, no, you don't.

Carlin Lutzer (32:42):

Yeah. So in 2027, are those changes going to happen in Alberta?

Brayden Vellenoweth (32:48):

For what? Sorry.

Carlin Lutzer (32:49):

For the insurance and basically, because what did you call it? You called it the

Brayden Vellenoweth (32:56):

CareFirst?

Carlin Lutzer (32:57):

CareFirst

Brayden Vellenoweth (32:57):

Model?

Carlin Lutzer (32:58):

Yes.

Brayden Vellenoweth (32:58):

Yeah. So that's going ahead in January 1st, 2027. As far as my understanding right now, they're still hammering out and working on details, but it seems like they've gotten a good handle on what they're looking to achieve. And yeah, that will be in place as of January 1st, 2027. What

Carlin Lutzer (33:22):

Will the insurance companies have to do in order to drop payments? Because you look at gas prices and you got the carbon tax and then okay, they reduce it and then all of a sudden they jack it back up. And what kind of accountability does insurance companies have? Will the Alberta government be doing the checks and balances to make sure that these cost savings that are happening to the insurance companies now will be reflected back to the people that are looking for insurance?

Brayden Vellenoweth (33:51):

Yeah. No, that's a good question. I think this is something that's like whether or not people will believe it or not, maybe it is what it is. Insurance companies don't want to make a lot of money, especially in a private system because that means that if they're doing that, they're not competitive in the marketplace. That's the core point of a private system with multiple insurers. They're aiming anywhere from five to 9% profit margins. They want to be making money, have a little bit of breathing room, but the main thing is that they've got reserves to pay out claims and there's minimum reserves that are regulated. Insurance is a very highly regulated industry. They have reserves that they're making investment income off of and they want to make sure that they can continue doing that. So the carriers don't want to be rolling around in cash.

(34:51):

They don't want to be seeing 140, 150% margins. Sorry, if you're at 100% like profit loss ratio, you're breaking even, right? You're in a dollar in premium, you pay a dollar out in claims. If you're at 98%, you're making two cents for every dollar. You're at 103%, you're paying out a dollar three in claims for every dollar you're earning in premium right. So they want to be around that 94 to 95% range.

(35:30):

And we've seen it time and time again in the industry that when there is profitable times, the rates do come down because they want to be profitable and they want to keep getting business and that's how it is. But to kind of give you just to set the table on where we're at in Alberta, if we're kind of like aiming for to have a couple percent profit margin there and anyone can look at this. We've got the Alberta Auto Insurance Rate Board. They post aggregated data on auto profitability for all the carriers because they have to disclose everything to the auto insurance rate board. So in 2022, on average, auto insurance carriers in Alberta saw a negative 0.5% return on premium. So for every dollar of premium that they earned, they paid out a dollar and 0.5 cents in claims. So we're basically breaking even there.

(36:31):

Not awful, it's fine. It's average, but there are plenty of carriers on either side. That's only an average, right? Some carriers are profitable, some aren't. 2023, we saw the rates slide down to negative 2.8%. So now for every dollar in premium they earn, they're paying out about a dollar and three cents in claim costs. So now they're losing money. Now, what do you think 2024 results were like? Negative 20%.

Announcer (36:58):

Oh, really? Okay.

Brayden Vellenoweth (37:00):

On average, for every dollar that they're earning in premium, they're paying out $1.20 on average in claims. So if you're sitting there as a business owner, this is your business, you go, why would I write a single one more auto insurance policy in Albert? On average, I'm losing money. And it's like, so you think about a fast food joint, selling burgers and fries. You go there, you buy a burger, cost you 10 bucks. And the total cost of the business owner is like $11. How much longer is that business going to be up and running for? Why would the guy even sell a burger? It doesn't make sense. He's losing money. So maybe he can sell something extra. Maybe he could sell fries on the side. Let's call this. Here's a tie to home insurance. So he sells you fries and maybe he makes like 80 cents in profit from the fries.

(37:55):

Okay. Well, I got to sell more than one burger and fries combo to make up for every just burger I sell, but not everyone buys fries. Not everyone buys fries from that place. Maybe they go down the street and they buy fries somewhere else. So at what point does the cost of the burger get raised? Well, now we're in a market where last couple of years, I mean, we've had rate caps in Alberta. They haven't been able to actually raise the rates. They've been limited. Now you're a business owner, you're losing money on your burgers and someone tells you that you can't raise your prices. So what do you do? How do you stay afloat in that market? You got to hope that your fries and your milkshakes and your onion rings, you sell enough of those to offset the cost of losing money on the burger or you leave the market.

(38:52):

There's been a couple carriers that have left the market the last couple years. So that's an option as well. And that's in my eyes, not great because when you have a reduction in competition in the market, you undermine the whole point of a privatized market and you need competition.

(39:11):

We don't need our insurance market to look like our telecom industry in Canada. You have option A or you have option B. That's not what anyone wants.

Carlin Lutzer (39:20):

Unless you're option A or option. Exactly.

(39:25):

No, this is very fascinating. I know that even lately you phone an insurance company and some of them won't even look at you if you're looking to phone around for rates. In fact, I talked to a guy, he basically said, yeah, right now if new people are phoning us, we're just telling them to stay where they're at right now. They're not taking on any more business right now. And yeah, obviously the industries in ... Well, to say it's in jeopardy, I don't know, but it sounds like they're in flux, that's for sure. And hopefully they can make the proper changes and that we do see it come down. But yeah, I just feel bad for the people that are legitimately injured and they have a little bit of a story going on that this, for example, if someone's a caregiver and they get injured and they can no longer give care to their kids and daughters, their kids at home anymore because now they're injured and they have to bring someone in, but they're just going to get, well, here, oh, here's the chart you broke your neck, here's X amount of dollars because that's what we said it's worth.

Brayden Vellenoweth (40:35):

Well, to be honest with you, that's how it is right now. But in order to get there, you've got to sue someone. So right now, the model that we have, you've got auto insurance, you've got liability and you've got accident benefits coverage. The accident benefits coverage is kind of what you've said. It's like da da da da da. Here's some charts, here's limits, this and that. Are you the head of household? Do you have dependents? Whatever it is. And it's definitely for smaller injuries, but as soon as you start going to larger items, well, now you need to go through the tort system and access the third party who injured you, access their liability coverage via litigation.

(41:20):

And so let's imagine that example that you said and you're sitting there and this is a big one and you got a broken neck and you can't do this, you can't do that. You've got medical costs and you're paying, you can't go to work and then entire time you've got a lawsuit going on. Have you been paid until that lawsuit is resolved? No. So are you in a jam because of our current system? I mean, it's possible. I think that there's going to be cases that you're going to find for both systems and you could do this all day long where it's the other system would be better.

(42:03):

We can invent anything that we want. The core piece here on the care first model is that it's not designed to be payout based for physical injuries. It is designed to provide care as quickly as possible because that's the other big thing with physical medical injuries is that when you don't quickly look to solve them and you have to like, for example, you're waiting for a lawsuit to complete. Well, now you're sitting there for six, eight, nine months, your body is what, not healing properly because you don't have the funds to go pay for it. But what happens if you can get access to care immediately because it's all set out very clearly, right? Now hopefully we can actually, you can get back up and running faster because you've got the care. So that's kind of like the idea behind it is that it's there to provide care and there's also a lot of monetary aspects to it as well where it does look at income replacement and yada yada.

(43:06):

And they've benchmarked this to other provinces that have similar models and applied like, okay, well, they're looking at what does Alberta salaries look like compared to there. Albert has very high salaries in Canada, right? So they're amending it to our specific case. So I can't help but look at something like this and understand that there's a lot of very smart and talented people that are working on it. And my hope is that it's going to work out good because at the end of the day, you want your insurance to make sure that you're receiving the care. It indemnifies you. That's the core concept of insurance is that you're indemnified.You're putting the position that you were prior to the loss. I hope that this system enables that on a continuous and reasonable basis. And if there are costs that it can shave off from the system that we can see reductions in premiums, then that's good.

(44:10):

That's great as well because I agree with you. Auto insurance rates in Alberta are nuts right now. I remember when I started, if you're a brand new driver, liability only, you're a 16 year old girl, you've got driver training, I could write you a policy for $1,400, brand new experience. In Calgary now, that's 4,000 bucks.That's

(44:40):

A lot.That's a big pill to swallow.That's pretty much what we're paying for a household and we've got a couple of vehicles and a house and life insurance and this is someone with liability cover.

Carlin Lutzer (44:54):

Yeah. And obviously we talked about the bells and whistles on those vehicles, but some of those bells and whistles are there for safety reasons and purposes and laying control and I guess maybe we just need to implement all self-driving vehicles and our insurance rates will come down.

Brayden Vellenoweth (45:13):

Maybe. I mean, if you've got less people on the road and less people driving, yeah, I can't see how rates won't come down. I mean, you look at COVID. So again, I gave you the doom and gloom years, but there's like a bit of a tail end of COVID, right? Everyone's got their claims kind of come in. The insurance companies for auto insurance actually did really good during COVID for like two years there and- Nobody was driving. Nobody was driving. So I mean, you're right. It's like the less we drive, the less risk that we're putting into the pool, there's going to be lower claims.

Carlin Lutzer (45:49):

Yeah, for sure. Brayden, anything else you can share with us before we go? Is there anything that was on your hit list that you wanted to talk about?

Brayden Vellenoweth (45:58):

Yeah. I guess the big thing here is that I think a lot of people are told that they have to have insurance, right? You go down to, you buy a car and you have to have auto insurance to get your vehicle registered. Ah, that's a grudge purchase. Someone's making me do this or you buy a house and there's a bank lending you. The bank says, "You need to have insurance on the property." No, that's fair. So a lot of people, their experience with insurance is someone else telling them that they have to do it and I don't disagree. There are cases like those two that I just described that you have to do this, you have to have insurance in place. But ultimately insurance is a personal financial decision. It's only one of many different strategies that you can utilize to mitigate your risk and insurance is a risk transfer strategy.

(46:53):

So how else can you mitigate your risk? Well, you can simply avoid it. If you don't buy a boat, you don't have a risk so you don't even need to think about it, right? You can choose to not mitigate the risk at all and simply self-insure. Well, you've bought a trailer, just don't insure your trailer, self-insure it, right? You can look to minimize your risk exposure, like were talking about earlier with homes, put a metal roof on, but fiber, cement, sydagon. So there's a lot of different strategies that you can utilize and insurance is just one of them and it needs to align with your own personal risk tolerance. If you've got a paid off house and you sit and it's worth $700,000 in the market or $800,000 for your rebuild costs and you got 30 million sitting in the bank, I mean, it's up to you, insure your house or don't.That's a decision that you can make.

(47:56):

And I think that that's what a lot of people kind of miss on is that it's a financial strategy to mitigate risk and it's done via a risk transfer mechanism. And short of those couple of areas where you are mandated to have insurance, you can make the decision. You don't have to insure your trailer. You don't have to buy replacement coverage for your vehicle. You don't have to have sewer backup coverage on your house. There's a lot of different decisions. You can have your deductible for your home insurance at $10,000 if you want, right? A lot of decisions that you can make. And I think that by really having a good conversation and asking questions and reviewing it and looking at it as a compliment to your personal financial strategies rather than the bank says, "I have to have this. " I think you can get a lot more value out of your insurance and it can be a lot more precisely targeted to meet your needs as well.

Carlin Lutzer (49:01):

For sure. Yeah. A couple of thoughts. My dad, we used to farm and it was always the great debate with farmers, "Well, do you get hail insurance or not? " And if you probably figured it out between the 20 years or whatever before with your crop getting wiped out, let's say you got wiped out every 15 years from hail, what are your costs that you're putting in and what kind of value you're going to get? And when a hailstorm does come through, sometimes it's in a little bit of a path that hits part of the field and all those things, right? Yeah, 100%. So it is quite fascinating. But yeah, and then unfortunately we're also dealing with the fraud, right? There's so much fraud, there's so much, oh, my vehicle got stolen out of my driveway. Do you know what I mean? And it's not true.

(49:45):

And it was the setup and the person was having some issues with the vehicle, so now they're cashing in and getting a payout, right? So Brayden, this has been a fascinating conversation. I appreciate you taking a risk and coming on and discussing insurance with me. But how can people get ahold of you? If they have questions, what I love is that you're local to Okotoks and you're able to meet with people, but what's the best way for them to get ahold of you?

Brayden Vellenoweth (50:15):

Yeah. So I manage a brokerage here in town. It's a larger brokerage that's a little bit in a bunch of different provinces. So we are open to phone calls. You can come visit us in person. I know that's a big thing that we've seen lately from a lot of clients, right? Some of the bigger national names, it's phone call only and you can't sit down with a human. So yeah, it's whatever method works best, but sitting down with someone and like in person and having some physical paper documents in front of you works for a lot of people and allows to really kind of like I said, tailor something to your personal needs. So yeah.

Carlin Lutzer (51:01):

Sounds good. Brayden, thanks for your time. Appreciate you.

Brayden Vellenoweth (51:05):

Yeah, no, appreciate the call. Carlin, it's always good to kind of chat about this and there's a lot of misconceptions about insurance. And like I said, it's definitely like a heated debate. We see that every day and that's all we deal with and just because we work in the industry doesn't mean that we think that everything's hunky door and is as it should be. Insurance is crazy in Alberta right now. I couldn't agree more. It is a wild time to be here.

Carlin Lutzer (51:31):

Yeah, for sure. Brayden, thank you. A big thank you to Brayden for joining me on the Okotoks Podcast and helping us better understand the complicated world of insurance. Whether you agree with every aspect of the system or not, one thing is clear, insurance is changing, costs are rising and it's more important than ever to understand what you're paying for and what coverage you actually have. My biggest takeaway from this conversation is that insurance isn't just about finding the lowest premium. It's about understanding risk, protecting yourself and your family, and making informed financial decisions. If today's episode helped answer some questions or gave you new perspective, I'd encourage you to share it with a friend, family member, or neighbor. Chances are they're dealing with the same questions about insurance that many Albertans are asking right now. And as always, thank you for listening. Thank you for supporting local conversation and thank you for supporting the Okotoks Podcast.

(52:42):

We'll see you next time.

Announcer (52:43):

You've been hanging out with us on the Okotoks podcast. Thanks to Carlin Lutzer Real Estate. We'll see you again real soon.