Alberta’s planned shift to a care-based auto insurance system could fall short of delivering expected premium savings unless proposed litigation provisions are reconsidered, according to a new report by consulting firm MNP.
The analysis, commissioned by the Insurance Bureau of Canada (IBC), estimates that allowing drivers to retain the right to sue in certain circumstances could increase required premiums by up to $136 annually.
The province's Care-First model is expected to replace the current tort-based system within the next 18 months. It aims to prioritize access to treatment and recovery benefits for those injured in vehicle collisions, while reducing overall costs.
However, the government has indicated that limited tort access will remain, specifically in cases involving serious offences under the Criminal Code or Traffic Safety Act, or for certain out-of-pocket expenses not covered by an injured person's insurance.
IBC contends that preserving legal avenues for compensation could undermine the model’s affordability goals. “Litigation is a significant cost driver in Alberta’s auto insurance system,” said Aaron Sutherland, vice-president, Pacific and Western, IBC. “Other care-based systems in Canada have eliminated this form of legal action to help reduce premiums and improve care.”
The MNP report comes as Alberta’s auto insurance sector faces mounting financial pressure. The Automobile Insurance Rate Board (AIRB) recently reported rising claims and legal costs, including a 9.7% increase in litigation expenses and an 11.9% rise in accident benefit costs. Vehicle damage claims are projected to grow by more than 15% this year, while insurers lost an average of 20 cents on every premium dollar collected in 2024 due to the ongoing rate cap.
Sutherland warned that unless legal cost pressures are addressed, the Care-First model may struggle to meet its objectives. “The government has committed to building a more affordable and effective system,” he said. “But that will require a significant course correction to reduce costs and improve stability.”
IBC and its member insurers are urging the government to remain focused on access to care and long-term affordability, and to work with industry stakeholders to finalise a model that achieves both.
