Overview

Alberta’s government continues to explore all possible avenues to provide relief for Albertans impacted by inflation and the resulting higher cost of living.

Reforms implemented in the fall of 2020 aimed to stabilize auto insurance costs and improve medical benefits for Albertans injured in collisions – potentially leading to cost savings for drivers. An expert committee independently reviewed Alberta’s auto insurance system in 2020 and provided recommendations that have informed these important steps.

In early 2023, rate increases for private passenger vehicles were paused until the end of the year to make auto insurance more affordable for Albertans. Insurance companies were also required to provide the option for most Albertans to pay their premiums through payment plans.

New reforms

New reforms expected to come into effect on January 1, 2024, include rate increase caps for good drivers, amendments for the Automobile Insurance Rate Board, and premium payment plan options to help more Albertans.

Rate increase cap

In 2024, Albertans with good driving records will only see their rates increase to account for Alberta’s inflation, using the September 2023 inflation rate.

In September, Alberta’s inflation rate decreased to 3.7% which was below the national average. On a monthly basis, Alberta also saw one of the largest inflation decreases among provinces.

A driver with a good record is everyone except those who have:

  • any at-fault accidents in the last 6 years;
  • any criminal code traffic convictions in the last 4 years;
  • any major traffic convictions in the last 3 years; or
  • more than one minor traffic conviction in the last 3 years.

Automobile Insurance Rate Board

Reduced driving patterns during the pandemic caused insurers to unexpectedly experience high profits, exceeding the benchmark set by the Automobile Insurance Rate Board (AIRB). Proposed amendments to regulations would grant the AIRB more authority to regulate Alberta’s auto insurance industry and keep rates fair.

If amended, AIRB would have the authority to direct insurers to return premiums to drivers during exceptionally profitable years. AIRB would also be able to request a rate filing from an insurer at any time, allowing the AIRB to review and possibly lower rates if necessary.

AIRB will also carefully monitor rate increases in 2024 to ensure that they are reasonable and justifiable.

Premium payment plans

In January 2023, the Superintendent of Insurance required insurers to provide premium payment plan options to most Albertans.

This measure is to be permanently adopted into regulation so Albertans would not have to fully pay their insurance premiums upfront for the entire year.

This will give Albertans the opportunity to budget for and manage their insurance costs over time.

2023 reforms

Effective January 26, 2023, Alberta’s government implemented a rate increase pause on private passenger vehicle insurance until the end of the year.

Rate increase pause

Auto insurance rate increases will remain paused until the end of 2023 to ensure that auto insurance remains accessible to Alberta drivers. However, some drivers may still have seen rate increases on their renewals in 2023 due to:

  • previously approved rate changes
  • changes in driving records, such as at-fault claims or traffic tickets
  • adjustments to insurance profiles, such as a change of address or a different vehicle

Premium payment plans

Insurance companies were required to offer most Albertans the choice to pay their premiums through payment plans rather than annually.

Read more on the Superintendent of Insurance Interpretation Bulletin

Previous reforms

Legislation changes

Bill 41: the Insurance (Enhancing Driver Affordability and Care) Amendment Act, 2020 received royal assent on December 9, 2020 to update the Insurance Act. The following changes came into effect in stages in early 2022:

  • limit the number of experts involved in traffic injury lawsuits to save money and speed up resolution
  • make the pre-judgement interest rate on pain and suffering damages a floating rate that begins to accumulate when written notice of an injury claim is given to an insurer or when a Statement of Claim is served
  • enable direct compensation for property damage to:
    • allow not-at-fault drivers to call their own insurer to cover car repairs
    • eliminate red tape between insurers and reduce costs incurred for pursuing damages from third-parties

Regulation changes

Regulation updates came into effect November 1, 2020 for most changes, and January 1, 2021 for the remainder. Updated regulations included:

  • Minor Injury Regulation
  • Diagnostic and Treatment Protocols Regulation
  • Automobile Accident Insurance Benefits Regulation
  • Automobile Insurance Premiums Regulation

Making rates more affordable

Measures to address affordability by containing cost-pressures associated with bodily injury claims:

  • revised definition of “minor injury” to include more injuries that do not have a permanent negative or life-altering impact for injured individuals
  • improved injury dispute resolution processes
    • for example, designating dentists as certified examiners to improve the evaluation of jaw-related injuries and help resolve disputes.

Improving care

Measures to improve care for Albertans by increasing coverage for diagnostic and treatment services and enhancing benefits included in mandatory auto insurance:

  • designated more types of health professionals as able to deal with traffic injuries, on referral by a primary care practitioner, such as psychologists, dentists and occupational therapists
  • included inflation-adjusted funeral benefits, grief counselling benefits and income replacement benefits
  • enhanced the patient referral process and better defines a “treatment visit”
  • improved clarity on coverage for medical equipment, home modifications and vehicle modifications

Providing more choice for drivers

Measures to support insurers in providing more choice in insurance products:

  • enabled innovative insurance options such as pay-per-kilometre
  • allowed insurers greater flexibility in applying Usage Based Insurance (UBI)
    • for example, insurers would be able to use UBI to set overall premiums in addition to current discounting purposes

Automobile Insurance Rate Board changes

The role authority of the Automobile Insurance Rate Board was expanded to provide full authority over elements such as insurer rating factors and rating programs, helping it to respond better to consumer and industry needs, modernize Alberta’s system for setting insurance premiums and the authority to establish guidelines and rules followed by industry.

Direct compensation for property damage

Direct compensation for property damage (DCPD) was enabled by legislation changes and took effect in Alberta on January 1, 2022, giving drivers more consistent treatment and faster response on collision claims.

With DCPD, drivers deal with their own insurers to cover vehicle repair costs if they are not at fault in collisions. DCPD eliminates red tape between insurers and reduces costs associated with recovering damages from third parties.

How DCPD works

  • DCPD coverage is part of mandatory auto insurance.
  • If you are not at fault in a collision, your insurance company will cover damages to your vehicle caused by another driver.
  • If you are 100% not at fault, DCPD covers 100% of the vehicle damage claim. If partially at fault, DCPD covers the not-at-fault extent of damage. Optional collision coverage, if purchased, would cover the at-fault portion of the claim. If you do not have optional collision coverage, you would need to pay the at-fault portion out of pocket.
  • The cost of your DCPD coverage will depend in part on the type of the vehicle you drive. In general, more expensive vehicles cost more to repair. An insurer may charge more for DCPD coverage to be able to cover expected repair costs.
  • Making a DCPD claim will not affect your premium. Your premiums may be affected by accidents for which you are partially or completely at-fault.
  • DCPD coverage automatically comes with no deductible. Some insurers may offer deductibles. Ask your insurance representative about deductible options and shop around to ensure DCPD coverage meets your needs and budgets.
  • DCPD applies to vehicle damage only and will not prevent drivers from pursuing legal action for injuries incurred in a collision.

If you decide to purchase optional collision coverage, it will continue to be used for vehicle damage resulting from a driver’s fault in collisions, as well as collisions involving uninsured vehicles or hit-and-runs.

At-fault drivers will still be held accountable by having to pay higher auto insurance premiums and having at-fault collisions added to their driving record.

Learn more about DCPD:

Next steps

In addition to the reforms implemented so far, the government has commissioned an external consultant to conduct an in-depth analysis to inform long-term reforms.

A draft report is expected by the end of 2023 and a final report by the first quarter of 2024. The results of the analysis will help inform the government’s decision in implementing sustainable, long-term solutions to address auto insurance affordability in Alberta.

We are considering all recommendations from Albertans and insurance experts. The insurance models of other jurisdictions – both within Canada and abroad are also being analyzed.

We are committed to making the necessary changes to ensure automobile insurance is fair, affordable and accessible for Albertans, and Alberta’s auto insurance system is sustainable.

News

Related

Automobile insurance

Automobile Insurance Advisory Committee

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