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

Auto insurance premiums in Alberta have been on the rise for years. What’s responsible for the higher price tag? Hint. It’s the soaring costs of lawsuits and legal fees.

In Alberta, litigation costs now account for a greater portion of the premiums that drivers pay compared to anywhere else in Canada.

The majority of Albertans injured in a collision make a claim and receive the benefits they need to recover, without having to engage a lawyer. But, under the current system, legal costs are now more than double the amount provided in a cash payment for pain and suffering for those injured in collisions.

CHANGE IS COMING.

The government’s auto insurance reforms are intended to address rising legal costs by moving to a Care-First system. This is good news. Alberta’s auto insurance system is finally getting the repairs it needs, and the government deserves credit for ensuring that consumers – not lawyers or insurance companies – are the ultimate beneficiaries.

The Care-First system is the harmonization of two important goals for the government – lower premiums and better and faster care for people injured in collisions. Core to this is rooting out excessive and unnecessary legal costs.

But the reforms need to be implemented correctly – it is essential that government get the legislative and regulatory details right.

The Care-First system will deliver real premium relief to drivers, but only if the government keeps care, not litigation, as the centrepiece of Alberta’s auto insurance system.

Here are the facts:

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

A 2023 report found that 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 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 Alberta drivers footing the rising cost of litigation, the province announced reforms aimed at reducing these fees and improving 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 legal claims are being made, 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%) Albertans wanted the government to take urgent action to address the rising cost of auto insurance. The new Care-First system does that.

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 the payment of 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, 2024, the Alberta government released two reports that provide further evidence of how much drivers would save on premiums by removing court involvement and lawyers from the auto insurance system.

This analysis found drivers can save hundreds if legal costs are brought under control. There was no longer any debate as the best way to deliver savings to Alberta drivers.

A few months later, government announced the province would move to a Care-First system.

ALBERTA’S AUTO INSURERS ARE HERE TO HELP

Alberta’s auto insurers – the people who live and work in this province – are working with government to help ensure the reforms are implemented effectively. As an industry that plays a vital economic role in the province, we are here to help the government get this right. The balance of care and benefits will be key to reaching the savings target.

A lot of work remains to be done in creating and implementing the legislation and regulation that puts the reforms into place. When that work is complete, insurers can begin to price, file rates, train staff about the new Care-First product and be ready to go on January 1, 2027.