In 2023, the average auto insurance premium in Alberta was $1,670 — the second highest in Canada behind Ontario which saw an average of $1,800
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The Alberta government plans to increase the auto insurance premium cap on good drivers from the current 3.7 per cent to 7.5 per cent in the new year and plans to create a new privately delivered auto insurance system that aims to limit legal action in certain instances.
The reforms are said to help with affordability by providing services faster to Albertans while still penalizing bad drivers. Once fully implemented, the province estimates drivers will save up to $400 per year.
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Premier Danielle Smith said the process for compensation is “long and unwieldy” for Albertans who are in collisions and said the reforms will move Alberta away from a “court-focused system” to a “care-first model.”
“The proof will be when the model comes forward, people will either get the rebate cheque in January or they won’t. But I can tell you, we’ve told the insurers this is kind of the end of the line,” Smith said.
A “good driver” is defined in Alberta as someone who does not have any at-fault claims in the past six years, a Criminal Code traffic conviction in the past four years, and a major traffic conviction in the past three years.
The province said the increase to the premium cap is due to high legal costs, increasing vehicle damage repair costs, and natural disaster costs.
The 7.5 per cent increase will include 2.5 per cent for catastrophic losses such as the Jasper wildfire and the Calgary hail storm. That increase will be re-evaluated for 2026.
In 2023, the average auto insurance premium in Alberta was $1,670 — the second highest in Canada behind Ontario which saw an average of $1,800.
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Alberta NDP Leader Naheed Nenshi said the new auto insurance system will be “worse” than what is currently in place right now.
“This government talks a game on affordability, while Alberta becomes harder and harder and harder to live in and more and more unaffordable,” Nenshi said.
He said Alberta has the highest insurance premiums in Canada, in some cases, double, triple, quadruple, what motorists are paying in British Columbia or Saskatchewan.
New auto insurance system will be a “care-first model”
In January 2027, the province plans to fully implement its new privately operated auto insurance system which will be a “care-first model.”
Officials said the new system is not a no-fault system but rather a no-sue system where bad drivers will be held accountable through higher premiums. The new system would remove the need to sue and, in most circumstances, motorists will not be able to sue at-fault drivers.
Under the new system, all injured parties who were involved in auto accidents, including those at fault, cyclists and pedestrians will have access to the necessary medical and rehabilitation benefits they need.
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The new model will also feature improvements to income replacement benefits up to a gross income threshold of $120,000 payable up to the age of 65. In the current system, Alberta offers disability support benefits of $600 per week which is payable for a maximum of two years after a collision.
A one-time permanent impairment benefit will also be available for those who are injured either catastrophically or non-catastrophically. The amount ranges depending on the severity.
Litigation available in some cases
Court access will still be available in limited circumstances. People injured in collisions will be able to sue at-fault drivers for pain and suffering damages where the at-fault driver is convicted of Criminal Code offences and select major offences under Alberta’s Traffic Safety Act. The changes mirror Saskatchewan’s insurance model which has similar clauses.
Those who have to pay out of pocket beyond what the listed maximums are will also be able to sue the at-fault driver for those expenses.
However, the province said since the benefits under the policy are substantial, they anticipate the volume of those claims will be low.
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Finance Minister Nate Horner said the reforms were not meant to take away the right to sue but reduce the need to sue.
“When we started looking at reforming Alberta’s auto insurance system, all our stakeholders agreed to the guiding principles of accountability, affordability, care-focused simplicity and stability,” Horner said.
The province plans to establish an independent dispute resolution body to allow those who were injured in a collision to appeal the decisions of insurers.
X: @kccindytran
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