20% of your auto insurance premiums go to legal costs and it's 100% wrong

WHAT’S DRIVING UP AUTO INSURANCE PREMIUMS?
HINT. IT’S LEGAL COSTS.

Auto insurance premiums in Alberta are on the rise. Pressures are mounting and urgent action is needed to improve affordability for drivers. What’s responsible for the higher price tag? Hint. It’s the soaring costs of lawsuits and legal fees.

Legal abuse and litigation costs now account for a greater portion of the premiums that drivers pay in Alberta than anywhere else in Canada. Without government action, it will only get worse.

There are times when you might need to engage a lawyer after a collision, but that should be the exception, not the rule. The majority of Albertans injured in a collision make a claim and receive the benefits they need to recover. However, some personal injury lawyers are using aggressive marketing and advertising to encourage more frivolous claims, which drives up costs for everyone. As a result, legal costs now vastly exceed – and are more than double – the amount provided in a cash payment for pain and suffering for those injured in collisions. Change is needed, now.

Here are the facts:

FACT #1: LEGAL COSTS ACCOUNT FOR ROUGHLY 20% OF WHAT DRIVERS PAY FOR AUTO INSURANCE.

A recent report found that lawsuits and legal fees associated with insurance claims have soared 31% in Alberta since 2018 and now account for about 20% of a driver’s premiums for mandatory coverage. Between 2018 and 2022, over $1.2 billion of the premiums that drivers like you paid went to legal costs associated with claims.

Payouts for legal settlements following collisions have grown faster and are now three times higher in Alberta than anywhere else in Canada.

With drivers footing the rising cost of legal system abuse, the province must take action to reduce these fees and improve affordability for drivers.

FACT #2: ALBERTANS RECOGNIZE THAT LEGAL COSTS ARE DRIVING THEIR AUTO INSURANCE PREMIUMS HIGHER.

Following a collision, the vast majority of drivers make a claim and receive a reasonable settlement. However, an increasing number of frivolous claims are being brought forward by Alberta’s personal injury lawyers, creating delays and driving up costs for everyone.

Albertans recognize this, and when asked about the main factor behind the challenges in Alberta’s auto insurance market, 74% of Albertans agreed that legal costs are driving up the price of auto insurance premiums. Four-in-five (81%) want government to take urgent action to address this challenge.

FACT #3: LEGAL COSTS MAKE UP AS MUCH AS 40% OF AUTO INSURANCE SETTLEMENTS.

Auto insurance premiums should be used to help those injured in a collision get the medical treatment they need to recover. Yet an increasing amount of the premiums drivers pay are going to line the pocket of personal injury lawyers.

Today, approximately 38% of settlements paid to people injured in an accident go towards the legal costs resulting from litigation. That’s more than twice the share that goes to the claimant to account for pain and suffering.

FACT #4: NEW ALBERTA GOVERNMENT REPORTS IDENTIFY THE IMPACT OF LEGAL COSTS ON DRIVERS.

On April 26, the Alberta government released two reports that provide further evidence of the enormous financial impact litigation costs and legal system abuse are having on the auto insurance premiums that drivers pay.

This new analysis has found drivers can save hundreds if legal costs are brought under control. There is no longer any debate: this is the best way to deliver savings to Alberta drivers.

The time for action is now.

ALBERTANS ARE PAYING TOO MUCH FOR AUTO INSURANCE, BUT IT DOESN’T HAVE TO BE THIS WAY. THERE ARE SOLUTIONS AVAILABLE TODAY THAT CAN HELP DRIVERS LIKE YOU SAVE ON YOUR AUTO INSURANCE PREMIUMS.

Alberta’s auto insurers – the people who live and work in this province – have offered the provincial government a proposal that would free drivers from the shackles of an antiquated and costly system. It would give drivers more control over their coverage and the ability to save by choosing new coverage options, while doubling benefits to those injured in a collision. Combined with regulatory and tax improvements, this proposal could save drivers an average of $325 annually on their auto insurance.

Learn more about Insurance Bureau of Canada’s Enhancing Care & Expanding Choice proposal here.

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Established in 1964, Insurance Bureau of Canada (IBC) is the national industry association representing Canada’s private home, auto and business insurers. Our member companies represent the vast majority of the Canadian property and casualty (P&C) insurance market.

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