Opinion: Care-First auto insurance offers promise of lower rates for Albertans

One year after the Alberta government unveiled its bold plan to overhaul its auto insurance system, significant progress has been made toward finalizing the new Care-First model.

As work inches closer to the finish line, there is reason for optimism that the new system will result in lower average premiums for most drivers when it comes into effect in January 2027.

This is a huge win for Albertans. Auto-insurance premiums in Alberta are some of the highest in the country and after years of adjustments to a system that failed to stem the tide of rising cost pressures, the province is finally steering in the right direction. Better care for accident victims at a better price for drivers.

While the prospects for success are encouraging, several obstacles remain as the government works towards final implementation — namely, fierce opposition from Alberta’s trial lawyers who benefit financially from the current system, as well as the critical efforts to bring competition back to the market.

But let’s start with the good news. Under the new model, people injured in collisions will receive faster and better care to help them recover, with the most generous benefits in the country. For added peace of mind, drivers can purchase extra coverage for more extensive protection.

In addition to medical needs, lump-sum payments for permanent impairments will be provided with one key difference from today — all the funds will go directly to those injured in collisions rather than disappearing to lawyers in costly court battles.

A recent report released by MNP finds that in today’s system, legal costs for litigated claims vastly exceed — and are more than double — the amount provided in a cash payment for pain and suffering for those injured in collisions. Approximately 38 per cent of a settlement disappears in legal costs charged by the claimant’s lawyers, while on average, just 15 per cent goes to the claimant for pain and suffering. Making matters worse, injured drivers are often forced to wait years before they see any settlement.

To say this is unfair is an understatement. It’s a key reason the government is introducing the new auto insurance system, which it has stated will “put care first so Albertans get better, faster and more reliable auto insurance. It’s care without the wait, compensation without the conflict and dignity when it matters most.”

Pulling out legal costs and redirecting them toward improving care and making insurance more affordable is a win for consumers. But it is vehemently opposed by the province’s trial lawyers who have launched an extensive pressure campaign to thwart government’s progress.

The reality is Care-First will provide Albertans with a greater ability to sue than drivers have under comparable systems in British Columbia, Manitoba, and Saskatchewan. Lawyers will still be able to represent injured persons following instances of impaired driving and other traffic safety or Criminal Code violations.

And, similar to the current system, drivers who cause accidents will be held to account through increased premiums.

Despite this, personal injury lawyers are calling for government to maintain the status quo. It’s a position that will keep premiums high and their pockets full, rather than deliver what everyday Albertans want —better care and improved affordability.

Two months ago, Premier Danielle Smith called on insurers and trial lawyers to make the new system work. That’s exactly what Alberta’s insurers intend to do.

While the industry is supportive and will help the government implement its new system, the design is fully within the government’s control. The decisions government makes over the coming months as it finalizes this new model will have a direct impact on the size of any savings that flow to drivers and the quality of additional benefits the new system provides. Our industry will continue to put forward recommendations focused on designing the best system possible for Albertans.

One key decision still needed is how the government will restore the competitive auto insurance market that consumers rely on. Alberta’s rate cap has crippled competition and distorted the true cost of insurance under the current system. It’s possible that some drivers may not see savings under the new model because of the rate cap, and its continuation is a clear threat to the success of the new system.

Alberta has an opportunity to put the open-for-business sign back up by ending rate interventions and adopting additional efforts to cut red tape. The return of a strong and competitive insurance market will allow Albertans to reap even more benefit from the coming reforms and could turbocharge additional savings in the years to come.

By successfully navigating these final challenges, the provincial government can deliver a better, more affordable auto insurance system for Albertans in 2027. Alberta’s insurers stand ready to help the government and Alberta drivers with this important transition.

Aaron Sutherland is vice-president, Pacific and Western, at Insurance Bureau of Canada.