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Part of Information for insurance consumers

Automobile insurance reform

Reforming Alberta’s auto insurance system so it is more affordable and stable for drivers and insurers now and in the future.

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Information for insurance consumers

Overview

The increasing cost of repairs, parts shortages and rising auto thefts are all driving up insurance rates across Canada. But the single biggest reason for the increase in rates in Alberta is the increasing costs of personal injury claims.

Alberta’s government asked independent experts to look at systems that could reduce the costs of auto insurance and improve the sustainability and stability of the insurance system.

Oliver Wyman, the Automobile Insurance Rate Board’s actuary, focused its work on comparing average premiums under different existing auto insurance systems, largely across Canada. The Nous Group, an internationally renowned economist group, examined the broader costs and benefits of these different auto insurance models.

Based on their findings, feedback of more than 16,000 Albertans, and consultations with auto insurance stakeholders, the government is planning to implement a “Care-First” auto insurance system in Alberta on January 1, 2027. This would be privately-delivered, allowing Albertans to continue choosing their insurers in a competitive market.

The Care-First system would focus on providing improved medical, rehabilitation, and income support benefits for all Albertans injured in a collision, while continuing to hold at-fault drivers accountable through higher premiums. Albertans injured in a collision would be able to access these enhanced benefits without the need to sue.

New updates

  • Care-First system

    Beginning on January 1, 2027, Alberta drivers would have:

    1. More benefits – all Albertans injured in a collision would gain access to enhanced benefits, including improved medical treatment, rehabilitation, and income supports. For those with more serious, lasting injuries, a one-time permanent impairment benefit would provide compensation, serving a similar purpose to pain and suffering damages in the current court-based system. 

      A Care-First system offers substantial increases in the benefits all Alberta drivers would receive, for example:
      • Medical and rehabilitation is currently limited to medically necessary expenses up to $50,000 for 2 years following a collision. This would increase to unlimited for eligible expenses over your lifetime.
      • Income replacement benefit is currently the lesser of $600 per week and 80% average gross earnings for up to 2 years following a collision. This would increase to a maximum of 90% of net income, up to a gross income threshold of $120,000, payable until age 65.
    2. Faster care – A Care-First model shifts the focus from court battles to meaningful support for recovery. Instead of navigating lengthy legal processes, Albertans would have access to the medical care, rehabilitation, and support they need when they need it most. This would allow Albertans to focus on getting better and back to work, not on litigation.
    3. Lower prices – By reducing the need for litigation, the system minimizes legal costs that drive up premiums. This would help to deliver a more affordable and stable insurance system for all Albertans.

    In summary, a Care-First system provides Alberta drivers with access to increased benefits for a reduced cost – focusing on getting the treatment they need faster. 

  • Rate increase cap

    In 2025, government will continue supporting good drivers by capping their rate increases.

    Rate increases for good drivers will be capped at 5% per year, and there will be an additional 2.5% rate rider allowed to account for natural disaster-related costs, such as the Jasper wildfire and Calgary hailstorm of 2024.

    • This means good drivers’ rates will be capped at 7.5% in 2025.  

    In 2024, good drivers saw their rate increases capped at 3.7%. Those drivers who did not receive the rate cap in 2024 due to implementation timing by their insurer will be capped at 3.7% in 2025, providing they still meet the definition of good driver at renewal.

    A good driver is everyone except those who have any of the following:

    • any at-fault accidents in the last 6 years
    • any criminal code traffic convictions in the last 4 years
    • any major traffic convictions in the last 3 years
    • more than one minor traffic conviction in the last 3 years

Care-First comparisons

Below are tables showing the comparison between our current insurance system and the Care-First system for common, serious and catastrophic injury treatment, compensation and timelines. 

Common injury

Table 1. Current court system vs. the Care-First system for common injury treatment, compensation and timelines.

 Court system (current)Care-First system
TreatmentUp to 21 pre-approved physiotherapy or chiropractic visits.Treatment provided for as long as there is a “measurable benefit”.
CompensationMaximum of $6,061 for pain and suffering damages plus out-of-pocket expenses.No pain and suffering damages, but out-of-pocket expenses can be claimed.
TimelinesTypically claim is resolved (treatment and compensation) within months.Typically claim will be resolved (treatment and compensation) within months.

Serious injury

Table 2. Court system vs. the Care-First system for serious injury treatment, compensation and timelines.

 Court system (current)Care-First system
TreatmentUp to $50,000 for 2 years. If more treatment is required, must sue at-fault driver.No maximum or time limit for treatment that provides a measurable benefit.
CompensationPain and suffering damages, as determined by the courts, loss of earning capacity, plus out-of-pocket expenses.May be entitled to a permanent impairment lump sum (between $1,000 and $187,000), income replacement benefit, plus out-of-pocket expenses.
TimelinesClaims can take years to resolve.Claims would be resolved when maximum medical recovery is achieved.

Catastrophic injury

Table 3. Court system vs. the Care-First system for catastrophic injury treatment, compensation and timelines.

 Court system (current)Care-First system
TreatmentUp to $50,000 for 2 years. If more treatment is required, must sue at-fault driver.No maximum or time limit for treatment that provides a measurable benefit. Ancillary supports for the rest of their life.
CompensationPain and suffering damages, as determined by the courts, loss of earning capacity, plus out-of-pocket expenses.May be entitled to a permanent impairment lump sum (maximum $295,000), income replacement benefit, plus out-of-pocket expenses.
TimelinesClaims can take years to resolve.Would receive treatment and care for the rest of their life.

Previous reforms

  • Rate increase pause

    Effective January 26, 2023, Alberta’s government implemented a rate increase pause on private passenger vehicle insurance until the end of the year. Some drivers may still have seen rate increases on their renewals in 2023 due to:

    • previously approved rate changes
    • changes in driving records, such as at-fault claims or traffic tickets
    • adjustments to insurance profiles, such as a change of address or a different vehicle

  • Premium payment plans

    In January 2023, the Superintendent of Insurance required insurers to provide premium payment plan options to most Albertans.

    This measure was later permanently adopted into regulation, so Albertans would not have to fully pay their insurance premiums upfront for the entire year.

    This gives Albertans the opportunity to budget for and manage their insurance costs over time.

  • Legislation changes

    The Insurance (Enhancing Driver Affordability and Care) Amendment Act, 2020 received royal assent on December 9, 2020 to update the Insurance Act. The following changes came into effect in stages in early 2022:

    • limit the number of experts involved in traffic injury lawsuits to save money and speed up resolution
    • make the pre-judgement interest rate on pain and suffering damages a floating rate that begins to accumulate when written notice of an injury claim is given to an insurer or when a Statement of Claim is served
    • enable direct compensation for property damage to:
      • allow not-at-fault drivers to call their own insurer to cover car repairs
      • eliminate red tape between insurers and reduce costs incurred for pursuing damages from third-parties

    Associated regulation updates came into effect November 1, 2020 for most changes, and January 1, 2021 for the remainder.

    Making rates more affordable

    Measures to address affordability by containing cost-pressures associated with bodily injury claims:

    • revised definition of “minor injury” to include more injuries that do not have a permanent negative or life-altering impact for injured individuals
    • improved injury dispute resolution processes
      • for example, designating dentists as certified examiners to improve the evaluation of jaw-related injuries and help resolve disputes.

    Improving care

    Measures to improve care for Albertans by increasing coverage for diagnostic and treatment services and enhancing benefits included in mandatory auto insurance:

    • designated more types of health professionals as able to deal with traffic injuries, on referral by a primary care practitioner, such as psychologists, dentists and occupational therapists
    • included inflation-adjusted funeral benefits, grief counselling benefits and income replacement benefits
    • enhanced the patient referral process and better defines a “treatment visit”
    • improved clarity on coverage for medical equipment, home modifications and vehicle modifications

    Providing more choice for drivers

    Measures to support insurers in providing more choice in insurance products:

    • enabled innovative insurance options such as pay-per-kilometre
    • allowed insurers greater flexibility in applying Usage Based Insurance (UBI)
      • for example, insurers would be able to use UBI to set overall premiums in addition to current discounting purposes

  • Automobile Insurance Rate Board changes

    The role authority of the Automobile Insurance Rate Board was expanded to provide full authority over elements such as insurer rating factors and rating programs, helping it to respond better to consumer and industry needs, modernize Alberta’s system for setting insurance premiums and the authority to establish guidelines and rules followed by industry.

    Reduced driving patterns during the COVID-19 pandemic caused insurers to unexpectedly experience profits that exceeded the benchmark set by the Automobile Insurance Rate Board. Amendments to regulations subsequently granted the board more authority to regulate Alberta’s auto insurance industry and keep rates fair.

    The Automobile Insurance Rate Board now has the authority to direct insurers to return premiums to drivers during exceptionally profitable years. The board is also able to request a rate filing from an insurer at any time, allowing the board to review and possibly lower rates, if necessary.

    The Automobile Insurance Rate Board carefully monitors rate increases to ensure that they are reasonable and justifiable.

  • Direct compensation for property damage

    Direct compensation for property damage (DCPD) was enabled by legislation changes and took effect in Alberta on January 1, 2022, giving drivers more consistent treatment and faster response on collision claims.

    With DCPD, drivers deal with their own insurers to cover vehicle repair costs if they are not at fault in collisions. DCPD eliminates red tape between insurers and reduces costs associated with recovering damages from third parties.

    Learn more about DCPD:

Get the best rate

There are steps you can take to make sure you get the best auto insurance rates.

Alberta’s Automobile Insurance Rate Board also has more information on getting the best auto insurance rates: shopping guide for auto insurance and rate comparison tool.

  • Shop around

    Take advantage of Alberta’s competitive auto insurance market by shopping around. Discover potential savings as different insurers may offer varying rates and coverage options. Comparing multiple rates can help you find a better deal that suits your needs and budget.

    Learn more about shopping the insurance market

  • Explore your options

    With over 25 private insurance companies offering private passenger vehicle coverage in Alberta, make informed purchasing decisions by exploring the various types of auto insurance and things to consider before choosing a coverage.

    Learn more about purchasing insurance

  • Understand your rates

    Take an active role in understanding how your auto insurance rate is calculated. By understanding how your rate is calculated, you can make choices that help in lowering your rate.

    Learn more about your insurance rates

  • Usage Based Insurance (UBI)

    Consider exploring Usage Based Insurance, also known as 'pay-how-you-drive' or 'pay-as-you-drive'. Through this type of insurance, you may be eligible for discounted rates or rewards based on your driving habits.

    Learn more about UBI

News

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