Alberta pitches new auto insurance system that may be in place by 2027

Alberta Premier Danielle Smith has announced significant changes to the province’s auto insurance system, which includes rate hikes and a shift towards a predominantly no-fault claims model. Under the new system, car accident victims will no longer be able to sue the party responsible for their injuries. Instead, insurers will pay compensation at rates set by the government.

The government estimates that these changes will lead to savings of up to $400 per year for the average insurance premium by cutting down on litigation costs. Additionally, the new system promises better support and benefits for those injured in collisions.

“This is a care-focused system,” Smith stated during a news conference at the legislature. “Instead of forcing people through complex legal processes to receive treatment, the default will be that those injured in collisions get the care they need to recover.”

To help insurers cover rising legal costs and payouts, as well as impacts from natural disasters like hailstorms, the government will allow rate increases of up to 7.5% for good drivers each year starting in January. This cap is more than double the current rate increase cap of 3.7%, set to expire at the end of the year.

In addition to the rate hikes, the government also unveiled details of the new system. Crash victims will still be able to sue at-fault drivers for pain and suffering if the at-fault driver is convicted of a criminal offense. If expenses exceed standard benefits, injured parties can also sue for out-of-pocket expenses. An independent body will be created to allow those injured in accidents to appeal decisions made by insurers.

The changes align with the litigation allowed in Saskatchewan’s no-fault, public system. However, based on government-commissioned reports, it is estimated that between 650 and 800 legal support jobs may be lost as a result of these changes.

While some have called for a publicly delivered insurance system, the province has opted to maintain a private insurance model due to high startup costs and potential job losses. Alberta NDP Leader Naheed Nenshi criticized this decision, stating that the cost of setting up a public option would be outweighed by the savings for drivers in premium payments.

The insurance industry has been facing challenges, with two private insurance companies recently leaving the province due to higher costs. The Alberta Superintendent of Insurance reported that one-third of auto insurers in 2023 lost money on insurance.

Overall, these changes to Alberta’s auto insurance system aim to create a more efficient and cost-effective model, prioritizing care for accident victims while addressing the financial challenges faced by insurers.