Alberta Premier Danielle Smith has announced significant reforms to the province’s auto insurance system, including a shift to a no-fault claims model. The changes aim to reduce legal costs and improve care for accident victims, with savings of up to $400 annually for the average driver projected by 2027.
Under the new system, car accident victims can no longer sue the at-fault party for injuries in most cases. Instead, insurers will provide compensation at rates set by the government, cutting legal expenses and streamlining claims. According to a report from the Canadian Press, Smith emphasized that the reform is designed to prioritize care for injured individuals.
“This is a care-focused system,” Smith said during a news conference. “Instead of forcing people through complex legal processes to get the treatment that they need, the system default will be that those injured in collisions get the care they need to recover.”
Until the new system is implemented, insurers will be allowed to raise rates for good drivers by up to 7.5% annually starting in January 2025. This cap is more than double the current 3.7% rate increase cap, which will expire at the end of this year.
The government argued that these rate hikes are necessary to address rising legal costs, insurance payouts, and the impact of natural disasters like hailstorms.
Finance Minister Nate Horner noted that bad drivers would continue to pay higher premiums, even under the new model, and clarified that crash victims could still sue for pain and suffering if the at-fault driver is convicted of a criminal offence like impaired driving. Victims may also sue for out-of-pocket expenses if their medical costs exceed the standard benefits.
Critics, however, raised concerns that the reforms would erode consumer protections. Jackie Halpern, spokesperson for the Alberta Civil Trial Lawyers Association, warned that the policy would harm consumers by limiting their rights to challenge insurance companies in court.
“We believe this policy will result in the worst of all outcomes: Albertans will pay more in premiums only to receive fewer consumer protections,” Halpern said.
Mark McCourt, an Edmonton-based automobile injury lawyer, criticized the shift to a no-fault model, arguing that insurers prioritize shareholders over injured policyholders' needs. “This no-fault product is going to be delivered by companies that are beholden to their shareholders—not to their injured policyholders,” McCourt said.
Insurance industry representatives welcomed the reforms but expressed concerns about the impact of continued rate caps.
Aaron Sutherland, vice-president at the Insurance Bureau of Canada, said that while eliminating legal costs could improve affordability, the 7.5% rate cap would still leave insurers struggling to cover rising costs. Sutherland pointed out that 60% of Alberta’s auto insurers suffered financial losses last year.
“The rate cap remains lower than the growth in the cost of delivering auto insurance, creating an unsustainable situation,” Sutherland said. “Unless the Alberta government removes the rate cap immediately, and premiums are allowed to return to required levels, consumer savings from any reforms will be greatly diminished and competition will be further eroded.”
Horner acknowledged the rate cap won’t make all insurance companies whole. “We’re trying to show the companies a path to 2027 that will somewhat stem the bleeding,” said Horner.
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