A new report titled “Alberta’s Vehicle Insurance Options” prepared for the Insurance Bureau of Canada (IBC) by economist Jack Mintz, the President’s Fellow of the School of Public Policy at the University of Calgary, has provided short- and long-term recommendations to help make auto insurance more affordable in the province.
The report comes on the heels of the International Day for the Eradication of Poverty, which is observed every year on Oct. 17. Vibrant Communities Calgary reports that those in the city are struggling, with Calgary’s poverty gap — the distance between a person’s income and the low-income line — increasing by eight per cent from 2015 to 2022. This is compared with a national increase of two per cent.
The “2023 Calgary Foundation Quality of Life Report” has also found that one in four people are struggling to have their basic needs met in the city.
As Albertans are facing some of the highest auto insurance premiums in the country — a mandatory expense for vehicle owners — it is now more important than ever that proper changes are made to increase affordability for Albertans, for good.
“No” to public insurance
As the provincial government has been quietly mulling over a private insurance solution such as has been done in B.C., Saskatchewan, Manitoba, and Quebec, Mintz’s report recommends that the province instead consider adopting a limited form of no-fault insurance for accidents involving minor injuries, where litigation costs can consume a significant portion of the benefits meant for the injured party.
Although the cost of litigation has been flagged before as a major cause of the rise in auto insurance rates before, new data recently released by the IBC reiterates the tenuousness of the situation. The latest data from the General Insurance Statistical Agency (GISA), a statistical body governed by provincial insurance regulators, indicates that the average legal settlement cost for auto insurance claims in Alberta surpassed $100,000 in 2023 — a new record in Canada.
Key findings include:
- Auto insurance settlements in Alberta have surged by 116% over the past decade, according to GISA data. As a result, Alberta drivers now pay more than triple the amount in insurance premiums for legal fees and litigation costs following collisions compared to drivers in other Canadian provinces.
- Between 2018 and 2022, the frequency of lawsuits following a collision rose by 48%.
- Over $1.2 billion was spent on litigation costs after collisions during the same time period.
- In cases that go to court, legal costs now greatly exceed — and are more than double — the cash payments provided for pain and suffering to those injured.
Legal and other cost pressures have driven auto insurance premiums far above the current provincial rate cap, creating an unsustainable marketplace, Mintz says. He recommends the province consider a limited form of no-fault insurance for accidents involving minor injuries to address this issue and stop frivolous lawsuits that have no benefits for the victims. This “balanced solution” preserves the ability to sue for damages if serious injuries or impairments occur, ensures at-fault drivers are accountable for their actions, and eases pressures on the court system and insurance companies.
Remove the cap
Calls to remove current Alberta’s rate cap, which was introduced at the end of 2023 and caps rate hikes at 3.7% for “good drivers,” continue.
Mintz’s report projects that drivers’ premiums could rise by 87.6% over the next decade if the rate cap remains and current trends continue. He argues that capping insurance premiums ultimately drives prices higher over time, primarily due to the instability caused when insurers can’t earn enough profit to sustain capital investment.
This has led auto insurers to lose money, prompting many to exit the province. Between 2013 and 2022, ten insurance companies left the Alberta market, and this year, three more have signaled plans to do the same. With less competition, Albertans have less options and opportunity to shop around for better rates and coverage.
Property damage, high vehicle costs and auto theft also a factor
What with rampant inflation, everything is costing more. Also playing in to the high cost of auto insurance in Alberta is the amount needed to repair property damage after an accident, the high cost of vehicles and rising rates of auto theft, especially in Calgary.
Lower auto insurance rates from Lane’s
Insurance brokers such as us at Lane’s have access to the very best policies available from Canada’s most respected auto insurance providers. As such, we also have access to a number of different types of discounts to help find you lower auto insurance rates. And we will never fail to ask if you qualify for each of them. We know the right questions to ask to ensure you get the best deal available.
Lane’s Insurance is a leading Alberta-based brokerage working out of Calgary, Banff, Edmonton and greater Alberta. We help you save by getting insurers to bid on your business. The end result is fantastic coverage at lower auto insurance rates.
