Alberta’s government has introduced a new privately delivered, “care-focused” auto insurance system based on the priorities that more than 16,000 Albertans expressed through an online survey.

The new system is slated to be fully implemented by January 2027. Alberta’s government commissioned two auto insurance reports, which showed that legal fees and litigation costs tied to the province’s current system significantly increase premiums.

A 2023 report by MNP shows a 48% increase in collision-related lawsuits between 2018 and 2022 with litigation costs exceeding $1.2 billion.

“Right now, insurance in the province is not affordable or care-focused,” a Government of Alberta press release states. “Despite high premiums, Albertans injured in collisions do not get the timely medical care and income support they need in a system that is complex to navigate. When fully implemented, Alberta’s new auto insurance system will deliver better and faster care for those involved in collisions, and Albertans will see cost savings up to $400 per year.

“Albertans who suffer injuries due to a collision currently wait months for a simple claim to be resolved and can wait years for claims related to more serious and life-changing injuries to be addressed. Additionally, the medical and financial benefits they receive often expire before they’re fully recovered.”

Under the new system, Albertans who suffer catastrophic injuries will receive treatment and care for the rest of their lives, according to the release. Those who are seriously injured will receive treatment until they are fully recovered. The changes mirror and build upon the Saskatchewan insurance model in which at-fault drivers can be sued for pain and suffering damages if convicted of a criminal offense, the release says. Such offenses include impaired or dangerous driving, or convictions of certain offenses under the Traffic Safety Act.

“Albertans have been clear they need an auto insurance system that provides better, faster care and is more affordable,” said Danielle Smith, Premier of Alberta, in the release. “When it’s implemented, our new privately delivered, care-centred insurance system will put the focus on Albertans’ recovery, providing more effective support and will deliver lower rates.”

Nate Horner, president of the Treasury Board and finance minister, added, “High auto insurance rates put strain on Albertans. By shifting to a system that offers improved benefits and support, we are providing better and faster care to Albertans, with lower costs.”

Work on this new auto insurance system will require legislation in the spring of 2025, and to reconfigure auto insurance policies for 3.4 million Albertans, auto insurance companies need time to create and implement the new system, the Alberta government wrote.

In the interim, beginning in January, the good driver rate cap will be adjusted to a 7.5% increase due to high legal costs, increasing vehicle damage repair costs, and natural disaster costs. The government says doing this protects good drivers from significant rate increases while ensuring that auto insurance providers remain financially viable in Alberta.

“Keeping more money in Albertans’ pockets is one of the best ways to address the rising cost of living. This shift to a care-first automobile insurance system will do just that by helping lower premiums for people across the province,” said Nathan Neudorf, minister of affordability and utilities, in the release.

Matt Hands, vice-president of insurance at rate comparison website RateHub, said in an interview with Postmedia that neither consumers nor insurance companies will be satisfied with the 7.5% rate cap.

“It’s going to be a challenge for insurance companies to operate within the metrics that they deem to be a healthy business,” Hands said of addressing affordability in the short term, according to the article. “It’s going to be difficult for consumers to find affordable auto insurance.”

In its 2023 Market & Trends Report, the Automobile Insurance Rate Board (AIRB) stated its concern with the affordability of automobile insurance for Alberta drivers.

“Following the pandemic, insurers sought approval for changes to their rating programs in mid to late 2022 to address their inflation challenges,” the report says. “Given these rate changes were implemented later in 2022, most policyholders saw a rate change at renewal in 2023. The overall rate change in the industry was just +0.6%, increasing the average premium from $1,578 in 2021 to $1,587 in 2022.

In 2022, the average Alberta premium increased from $1,578 in 2021 to $1,586, which the AIRB said shows stabilization, according to the 2023 market report.

“[T]he 5.24% increase in auto insurance premiums for Albertans in 2023 can be attributed to a combination of factors beyond the rate pause,” the AIRB states on its website. “Existing approved rate increases, individual policyholder actions, and changes in personal circumstances such as at-fault claims, traffic violations, and vehicle changes all contribute to fluctuating premiums.

“Moreover, the gradual reduction of discounts and the insurer’s assessment of driver and vehicle age play significant roles. Understanding these variables can help Albertans better navigate their insurance renewal and anticipate potential changes in their premiums.”

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