Will Alberta’s radical changes to car insurance fix major mess?

Article content

The Alberta government is bringing in radical change to automobile insurance in Alberta.

It’s not as radical as Alberta moving to the same public “no-fault” systems seen in British Columbia, Saskatchewan and Manitoba.

Turning a private industry into a Crown corporation was a bridge too far for Danielle Smith’s United Conservatives, even if that would have been a more tried and proven approach. But Alberta’s new system will have many similar aspects to those public systems.

Article content

Nothing much will change in the short term, except the usual — our rates will go up. The annual rate cap increase has doubled to 7.5 per cent for the next two years. in 2027, when the new system is in place, we will still buy our insurance from private companies. But if you get injured in a collision, huge changes are coming. Claims and pay-outs are to be handled much like the public, no-fault system in Manitoba. Just as in public, no-fault systems, no longer will injured Albertans have to sue at-fault drivers to get all the help they need. Instead, all injured parties will see their insurance cover their medical needs at once and for as long as they need it.

Only in rare cases — where there’s a Criminal Code offence or major traffic safety offence — will lawsuits be allowed. On the employment front, the change means there will not be huge new numbers of new public sector employees, nor major private sector job losses, save for in legal services. With so many fewer lawsuits, we can expect 650-800 law jobs to disappear.

However the new system works out, one thing most will agree on is our current system is a mess. Even the government owns up to Albertans paying monster rates while at the same time failing to get the necessary medical care and income support.

Article content

Article content

“This system isn’t working,” Premier Danielle Smith plainly admitted in announcing the new plan.

The firm of Olivier Wyman found in an independent report for Alberta government that as of July 1, 2024, the average Alberta insurance premium was $2,015, second only to Ontario, and much more than $1,245 in Manitoba and $1,252 in British Columbia and $1,252 in Saskatchewan.

In the legislature this week, UCP Finance Minister Nate Horner bashed away at the current insurance system, taking aim at his government’s own previous 3.7 per cent cap on the annual increase of insurance cost. “Caps don’t work,” Horner said in response to a question from the NDP’s Kathleen Ganley. “Yours didn’t work — ours didn’t either. It’s a short-term initiative to slow the bleeding,”

Horner went on to say that the current system doesn’t reflect the costs being incurred by private insurers by about 17 per cent. “There’s currently one profitable insurance company left in Alberta. Two have left already. Many more are considering it.”

The answer, Horner insisted, isn’t a public system like we see in B.C., Saskatchewan or Manitoba, which would have immense start-up costs of $3 billion and might take four or five years to set up.

Article content

But has Horner found the answer?

Alberta’s new system should provide an annual cost savings of about $400 on the average annual Alberta premium, the Olivier Wyman study found.

One issue will be whether or not the private insurers can handle the more generous pay-outs seen under this kind of system.

But perhaps the biggest issue is the government’s ambition here. Olivier Wyman noted that private delivery of a no-fault model will be a first in Canada.

Depending on your politics, that either sounds exciting to you or it leaves you wondering why Alberta simply didn’t go with what appears to be working in B.C., Saskatchewan and Manitoba.

Of course, politics is at play here. I’ll suggest you can see the UCP’s ideological antenna on full alert with the government’s odd insistence that this new system is not a “no-fault” system. As Horner said Thursday, “I really think that’s a misleading label and just not right.”

No doubt the idea of no-fault insurance is a dirty word to some Albertans. They pride themselves on personal responsibility, the notion that if you screw up, you should pay for it, and certainly bad drivers should pay fully for their own carnage.

Article content

The government says that under its new system bad drivers will still have to pay higher insurance premiums. But I note that same measure is also a hallmark of public, no-fault systems.

For now, we’re left to wonder if this new approach will work. Maybe it will be a big win for all parties, save injury lawyers. I suspect it will be better than what we have now but that’s an extremely low bar.

[email protected]

Bookmark our website and support our journalism: Don’t miss the news you need to know — add EdmontonJournal.com and EdmontonSun.com to your bookmarks and sign up for our newsletters.

You can also support our journalism by becoming a digital subscriber. Subscribers gain unlimited access to The Edmonton Journal, Edmonton Sun, National Post and 13 other Canadian news sites. The Edmonton Journal | The Edmonton Sun

Article content