November 21, the Alberta government announced reforms to the province’s auto insurance system that will see the province move to a “care-first” system, as of January 1, 2027.
They say the system will focus on providing improved medical, rehabilitation and income support benefits, 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,” the government stated in its announcement.
Among the changes, they say those with serious, lasting injuries will receive a (currently unspecified) one-time, permanent impairment benefit. Medical and rehabilitation that is currently limited to medically necessary expenses up to $50,000 for two years following a collision, has been increased to unlimited eligible expenses for the victim’s lifetime.
Income replacement
Income replacement has also been increased from the current system where victims are paid the lesser of $600 per week or 80 per cent of their gross earnings for two years – this has been increased to 90 per cent of net income, up to a gross income threshold of $120,000, payable until age 65.
The reforms, however, stop short of removing the rate cap altogether.
Notably, the “good driver” cap, although increased, remains in place at 7.5 per cent in 2025. Broken down, this is a five per cent rate cap with an additional 2.5 per cent rate rider allowed to account for natural disaster-related costs.
Even those who qualify for “good driver” status in the province have seen their rates increase over the time the rate cap has been in place, however, as this designation is removed for convictions, but also when a customer makes administrative changes to their policies – such as changing addresses or changing vehicles.
Another aspect of the reforms is new authority being bestowed on the province’s Automobile Insurance Rate Board: Under the new system, the rate board now has the authority to direct insurers to return premiums to drivers during profitable years. It can also demand a rate filing from an insurer at any time.
Further consumer harm
Following the announcement, the Insurance Bureau of Canada (IBC) made its own statement saying its members welcome the changes, pointing out that rising legal costs are one of the key drivers of the premiums being paid by Alberta drivers today.
“Continuation of the rate cap is likely to lead to further consumer harm and a deterioration of Alberta’s competitive auto insurance market,” they write. They also point out that according to the Alberta Superintendent of Insurance’s own accounting, 60 per cent of auto insurers in the province suffered a financial loss last year.
“The rate cap remains lower than the growth in the cost of delivering auto insurance,” they write, calling it an unsustainable situation. “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.”
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