A recent report from Alberta’s Auto Insurance Rate Board notes that in 2023, despite claims costs dropping again last year (by 2.65 per cent), auto insurance rates rose 5.25 per cent. The report also found that auto insurance industry profits (including investment income) skyrocketed in 2023 compared to the industry’s 2022 profit margins.
The report pegs the average annual basic auto insurance premium at $1,079, less than $90 per month. This is up only $388 from the $691 average annual cost of basic coverage in Alberta in 2002, more than two decades ago — an increase substantially below the general inflation rate.
Innocent victims of negligent drivers deserve fair compensation from at-fault motorists’ insurers, and drivers with poor records on the road should pay significantly higher premiums than the 80 per cent of Alberta policyholders with good driving records. No-fault auto insurance (the system in place in Manitoba, Saskatchewan and B.C.), which rewards reckless drivers with lower premiums and higher benefits at the expense of good drivers and innocent injured victims, is unpopular — even the insurance lobby opposes the idea.
Let’s be clear: To deliver lower premiums, no-fault jurisdictions slash compensation for innocent victims and marginally increase compensation for at-fault motorists. Rates for good drivers rise a bit but rates for bad ones plummet, so that the overall average premium price drops, albeit only temporarily until the spike in road carnage that tragically and inevitably follows a switch to no-fault sends rates rising again.
You get what you pay for: In Alberta, the average claim payout is more than $12,000. In the three no-fault western Canadian provinces, the average claim payout is less than $6,000, spread between innocent victims and careless drivers regardless of fault. Replacing auto accident tort law (the system in place in half of Canada’s provinces) with no-fault auto insurance in Alberta would be a very bad idea.
What is the road map to a “win-win-win” for insurers, Albertans and our UCP government?
Potential action items for the government to consider include modifying the grid framework so as to stop making good drivers oversubsidize the rates of bad ones, repealing the Direct Compensation Property Damage scheme (as per a resolution passed by party members at last year’s UCP AGM), ordering insurers to rebate good drivers’ premiums paid in 2023 in excess of the AIRB’s target benchmarks, scrapping the insurance premium tax, reducing compulsory Section B benefits and allowing insurers to sell optional excess Section B benefits, waiving Schedule C costs on claims settled at the adjuster level, eliminating prejudgment interest on general damages, enacting an automatic 25 per cent contributory negligence reduction for failure to wear a seatbelt, incentivizing through reduced premiums the use of winter tires, increasing penalties for traffic violations and for uninsured driving, implementing an insurance validation program, codifying a discount rate for future damage calculations to eliminate the need for costly expert economist reports, reducing the health-care recovery levy, slashing bloated insurance broker commissions, de-indexing the minor injury cap and reducing the amount of the cap by 17.5 per cent to $5,000, and requiring those who wish to receive capped compensation for injuries captured by the Minor Injury Regulation (which comprises 80 per cent of claims) to purchase that coverage from their own auto insurers (thus relieving negligent drivers’ insurers of that particular compensatory responsibility).
Adopting even a fraction of these suggestions would bring the average Albertan’s auto insurance premiums more in line with the policy prices of the substandard, no-fault public auto insurance products offered in the other three western Canadian provinces, while still delivering to consumers superior bang for the buck with competitive private insurers in an auto accident tort law system that remains a key component of the Alberta Advantage.
Mark McCourt is an automobile accident injury lawyer and principal counsel of the firm McCourt Law Offices in Edmonton.