Automobile insurance reform

Overview

Costs associated with bodily injury claims have been escalating at a pace that far exceeds inflation, resulting in continuing increases to driver premiums.

We have taken steps to improve Alberta’s auto insurance system to ensure sustainability for industry and optimal insurance options at reasonable prices for consumers.

In the fall of 2020, we took action 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.

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:

• Auto Insurance Rate Board (AIRB) - Direct compensation for property damage
• Superintendent of Insurance Notices
• Direct Compensation for Property Damage Regulation

Current efforts

Our short-term actions focused on making rates more affordable, improving care and expanding options, like pay-as-you-go and usage-based insurance.

These measures required making changes to legislation, regulations and the Automobile Insurance Rate Board (AIRB).

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 (AIRB) changes

The role authority of the AIRB 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.

Next steps

In addition to the reforms implemented so far, COVID-19 has also affected claims costs for all automobile insurance coverages that involve road usage (bodily injury, property damage, accident benefits and collision). We will continue to closely monitor Alberta’s insurance market and assess the impact both COVID-19 and recent legislative and regulatory changes have had on insurance rates for Albertans and industry sustainability.

Should further reforms be necessary, 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.