At the end of July, Alberta released its anticipated regulations governing the province’s new Care-First automobile insurance model. In response, the industry’s association, the Insurance Bureau of Canada (IBC) has come out endorsing the program, saying the industry is ready for the heavy lifting required to switch away from the old, litigation-based model.
In Alberta, it’s estimated that more than 50 per cent of premiums today go towards the costs associated with litigation and injury claim settlements. “Care-First redirects these costs to vastly improve the care and benefits provided following collisions, while reducing the price drivers pay for their insurance coverage,” the IBC’s announcement related to the Alberta regulation release states. “The release of these regulations gives insurers the details they need to begin pricing the new system and preparing renewal notices for customers.”
Interestingly, the IBC’s vice president, Pacific and Western, Aaron Sutherland, says the release of the new product’s regulatory details may not be enough in itself to bring insurers who have left the market back to the province.
“The auto insurance product isn’t the biggest determining factor of an insurer’s appetite to sell in Alberta or where it deploys its capital and capacity; it is more about the regulatory structure surrounding the auto insurance product,” he says. “That’s where government needs to continue to focus its attention as it increasingly finalizes what Care-First looks like and what that coverage looks like.”
Prohibitive regulation
He notes that the province’s “all-comers rule”, which requires insurers to provide basic mandatory coverage to any eligible driver who applies for it (Sutherland calls it one of the most restrictive in the country), the province’s “excess profit policy”, which requires insurers to return premiums to shareholders if they exceed benchmark profit levels and the province’s well-known rate cap are all examples of prohibitive regulation in the province which can cause insurers to think twice about operating there.
“I would suggest Alberta still has a lot more to do on the regulatory front to streamline that aspect of the marketplace, cut through some of that red tape and really incentivize insurers to come back or really expand their capital,” he says. “It’s the regulatory environment that is the biggest determinant of whether or not insurers deploy their capital in any province. The regulatory environment in Alberta remains very restrictive. One thing we’re encouraging government (to do), as they finalize the Care-First model and product, they need to turn their attention to some of the regulatory barriers.”
As for the Care-First developments, Sutherland points out that the resulting products should be among the most generous in the country, giving people the highest level of recovery and income replacement benefits as part of the basic policy. He also says the association anticipates that the price of auto insurance will start coming down in that province, beginning in January 2027.
“It really is delivering on everything Albertans could need following a collision, without the cost, complexity and delay you see today when these types of claims are litigated,” he says.
He also acknowledges that the transition will come at a significant cost to the industry, which needs to transition systems, train staff, engage partners, brokers and the health care community, “really at lightning speed.”
“This is a very heavy lift, but it’s something this industry is keen and eager to begin moving on now that we have these details, because we see the benefit it creates for our consumers,” Sutherland says. “Everyone wants to be able to deliver the best auto insurance product possible for their drivers. Care-First goes a long way to achieving that.”
