According to this year's annual Market and Trends Report, legal and litigation costs now account for 58.2 per cent of premiums that drivers in Alberta pay. And although comprehensive vehicle damage claims associated with severe weather events, like hail, were down year-over-year, inflationary pressures have raised the cost of repairing vehicles for these claims by almost 27 per cent in recent years.

The report was published this summer by Alberta’s Automobile Insurance Rate Board (AIRB), the regulatory agency which oversees and approves auto insurance rates in the province. Moreover, this edition will be one of the last to be published before the province’s Care-First regime comes into place.

The extensive document is an evidence-based assessment of conditions in Alberta’s auto insurance market. “The data in this report reflects the full impact of the Good Driver Rate Cap in 2024 and 2025,” the report’s authors write.

“The report provides further validation that the government’s new Care-First insurance system can’t come soon enough,” Insurance Bureau of Canada (IBC) vice president, Aaron Sutherland said in a statement following the publication’s release. “Legal costs remain the most significant cost pressure underlying drivers’ premiums and trial lawyers continue to play a costly role in the current system.”  

Losing money

More, the IBC points out that despite an increase in the cost of premiums, the sale of automobile insurance remains unprofitable in the province, with insurers losing nine cents for every dollar of coverage they sold in 2025.

“Auto insurance affordability remains a central concern for Alberta drivers,” the report states. “Insurer loss ratios remain elevated, underscoring the ongoing tension between affordability for consumers and financial sustainability for insurers.” The industry private passenger vehicle (PPV) loss ratio was 83.6 per cent in 2025, compared with 98.9 per cent in 2024.

Broken down, PPV policies made up 79.4 per cent of Albera’s auto insurance market by vehicle count, followed by commercial vehicles which made up 8.2 per cent of the total vehicle count. Motorcycle policies came in at 4.6 per cent of the total, while ATVs made up 4.1 per cent of the count and antiques and classics accounted for 1.8 per cent.

“On a written premium basis, PPV accounts for 78.9 per cent of the market, while commercial vehicles account for 12.3 per cent.” The market currently provides coverage for 3.1 million PPVs and 320,000 commercial vehicles.

The publication also looks in depth at consumer trends, economic trends, the investment environment for insurers, minimum capital test ratios and trends in both PPV and commercial vehicle ownership, insurers’ market rankings over time, average premiums and lost cost by coverage and discusses theft in some detail.

The IBC calls the annual report an important assessment. “If we want to meaningfully and sustainably improve affordability for Alberta drivers, we have to address the underlying costs that are driving premiums, and the AIRB clearly demonstrates that legal costs are the biggest part of the challenge,” the associations’ representatives write in an exchange with the Insurance Portal.

Rate caps don’t work

“The overall findings were not surprising. The IBC has been raising concerns for several years about the growing cost of Alberta’s tort-based system and the impact that legal costs have on driver premiums. It also helps demonstrate why measures such as rate caps don’t work and cannot solve the underlying affordability challenge.”

As for Care-First, which takes effect on January 1, 2027 – claims occurring from that point forward will begin to be handled under the new system – the IBC says the 2028 Market and Trends Report will likely provide a helpful picture of how the market is evolving following implementation. “IBC will also be closely monitoring data from the General Insurance Statistical Agency (GISA) as it becomes available, particularly claims costs and premium trends following a full year of experience under Care-First.”