Experts weigh in on Alberta’s auto insurance reform plans

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Albertans pay among the highest premiums for auto insurance and now the province will be doubling the insurance premiums cap for good drivers, which they claim will help with affordability in the long haul.

Industry experts say while the plans to create a privately delivered “care first” auto insurance system looks good on paper, in the two years before the system is in place, neither consumers or insurers will be happy. In addition, limiting legal action to select scenarios will have an impact on the industry’s job market, and hiking the cap on annual increases to premiums to 7.5 per cent, from 3.7 per cent, will make affordability less attainable in the future.

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Postmedia spoke to three industry experts on their thoughts on how the plan will aid with affordability, accountability for bad drivers and what this means for those working in the legal industry.

Affordability in the short term will be a challenge

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 per cent rate cap. He said when it comes to addressing affordability in the short term, “it’s going to be a challenge.”

“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.

“It’s going to be difficult for consumers to find affordable auto insurance.”

He said the government’s hope with the new system is that it will be able to offer reprieve to the market in two years so insurance companies feel the system works better for them, and consumers feel the prices they’ve been paying have reduced.

Premier Danielle Smith said on Thursday that once the new system is implemented in January 2027, Albertans would be saving up to $400 per year on insurance premiums. But in the meantime, starting January 2025 and for the next two years, Albertans will see increases to their premiums capped at 7.5 per cent.

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“You could call it better, faster service,” Smith said.

In 2023, the average auto insurance premium in Alberta was $1,670 — the second highest in Canada behind Ontario which saw an average of $1,800.

Over the next two years Albertans will be paying, on average, as much as an additional $260 with the 7.5 per cent increase.

Fewer lawsuits, fewer jobs

Under the new system, all injured parties who were involved in auto accidents, including those at fault, cyclists and pedestrians, will have access to the necessary medical and rehabilitation benefits they need.

The new system would remove the need to sue in most circumstances. However, in select cases, such as if an at-fault driver has been convicted of Criminal Code or major traffic safety offences, or if the injured driver has to pay more out of pocket beyond what is listed on the maximum benefits, they are able to sue the at-fault driver for those expenses.

However, the province said since the benefits under the policy are substantial, it anticipates the volume of those claims will be low, which means many people could be out of a job in two years.

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According to government commissioned reports, under the new system there will be around 650 to 800 job losses for legal support staff.

Finance Minister Nate Horner said the government is minimizing the losses and said he takes no comfort in providing any job uncertainty.

“Transition is tough, and I know that we’ve seen this happen in other provinces like BC. … Fortunately, they’re a very educated and skilled lot that are able to adapt and work in different areas of the same sector,” he said.

Herman Sidhu, a lawyer at Yanko and Popovic, a firm that practises in the area of personal injury law, said it will not just be lawyers who are impacted but paralegals, support staff and court runners. He thinks there will be more than 800 job losses.

“We heard the government say yesterday that benefits are very limited, as they are under the current system, but what we need to understand is that the average payout still is far under what those benefits provide for,” Sidhu said.

“The government is able to deliver a public system of insurance that preserves the right to sue, but instead, they’ve opted for the lazy way out and give the insurers exactly what they want, the entire decision-making over claims so they can control exactly how much is paid out and how much they rake in.”

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Accountability for bad drivers means higher premiums

Officials said in a public survey of more than 16,000 Albertans, 73 per cent of respondents believe it is important to retain the ability to sue an at-fault driver, and 60 per cent said they would not need to sue if the benefits provided by their insurance companies support their needs.

RateHub’s Hands said the new “care first” system would be able to provide Albertans with the support they need by cutting legal costs while still holding bad drivers accountable, since they will pay higher premiums. He said the key to holding at-fault drivers accountable will be through insurance companies and regulation.

“I think it all sounds great in principle. It sounds like they’re going to offer better medical-coverage options, they’re going to increase the amounts that you’re getting, and they’re going to make it easier and quicker for you to get it by moving towards a more no fault system,” Hands said. 

Mark McCourt, an auto accident injury lawyer, said contrary to what the province said about shorting lengthy legal battles, the majority of accident injury claims are settled outside of the court and do not need to go to trial. He said the new system, despite the province calling it “care first,” has similar qualities to a no-fault system.

“No-fault insurance takes away the rights of people injured by reckless drivers to obtain compensation for their injuries from those negligent motorists’ car insurance companies,” McCourt said.

“What no-fault insurance does, is it increases premiums for good drivers while removing the rights of good drivers … while increasing, at least on paper, benefits for bad drivers.”

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