The Alberta government plans to announce its insurance reforms this fall.
The cost of auto insurance has emerged in recent years as an issue for drivers and insurers alike.
The Insurance Bureau of Canada (IBC) — the national industry association representing most insurance companies — performed a Cross-Canada analysis
It showed Alberta, on average, had both the second-highest premiums ($1,587) and claim size ($12,309) of any province, behind only Ontario.
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And, while there are many options of how to address the situation, the government, insurers and motorists all largely agree that the current system is no longer working well.
Here’s a look at how we got here and what may come next.
The government requires insurance to legally operate a vehicle in Alberta.
That insurance must cover accident benefits to anyone else in your vehicle should they be injured; third party liability for any injuries caused to another person; and direct compensation for property damage.
Claims are adjudicated on a fault-based system that divides those involved in to those who are deemed to be at fault, and those who are not.
Those who have been deemed to be not at fault can sue the at-fault driver, along with the accompanying insurance provider, for compensation.
Other insurance elements are optional, including coverage for damage after a collision where the policyholder is at fault, and comprehensive insurance to cover damage not resulting from a collision.
In short, it’s resulting in premiums that are too high for drivers. It’s also proven unsatisfactory for some insurers, three of whom in the past year have elected to leave the province.
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Insurers have pointed to rising repair costs, legal fees, higher claim values and a rise in car theft as reasons for rising premiums.
That prompted the province to institute a rate freeze in late 2023, followed by a rate increase pause of 3.7 per cent last November that applied to “good” drivers.
It also commissioned a pair of reports by two different consulting firms that evaluated auto insurance models from around the world.
No-Fault insurance
Under no-fault systems, claims are handled by a driver’s own insurance, regardless of who was deemed to be at-fault in a collision.
Such systems also may include some kind of limitation on litigation in an effort to reduce legal fees.
Proponents argue it is the simplest way to reduce premiums, while opponents argue the system robs people of their legal right to sue and in effect rewards bad drivers.
Hybrid system
Alberta’s insurers, via the ICB, have proposed something of a hybrid system whereby drivers can choose whether they want coverage that allows them to sue the other driver following a minor injury.
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Under this plan, drivers would retain the right to sue for serious injuries, with ICB claiming such a plan would save drivers up to $325 annually.
ICB says that plan would address much of the large legal costs that it says have driven up premiums.
That plan has been criticized by some who say it’s too close to a no-fault system and will result in minimal savings for most drivers.
Public insurer
One option that is less likely to emerge is the move to a public auto insurer as seen in B.C., Saskatchewan, and Manitoba.
The government-commissioned reports showed this model would cut premiums in Alberta by an average of $732 a year.
But, Premier Danielle Smith told Postmedia last month that the cost of setting up a provincial insurance corporation, estimated to be around $3 billion, would likely be too high for her government to stomach.
Such systems have also been criticized for potentially passing on insurance costs to non-drivers.
Beyond the expected continued anxiety over high premiums, we don’t yet know if a public consensus has developed on which of the above systems is preferable.
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The government is reviewing the results of its online engagement survey that was open from April 26 to June 26.
The survey focused on five themes — affordability, stability, simplicity, care-focused, and accountability.
The province has pledged to make the results of that survey public once changes to the system are announced.
The province says it’s reviewing the results of that survey as well as consulting with insurers.
The finance ministry expects to announce the reforms it settles on in the fall of this year.
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