Alberta auto insurance system cost pressures among highest in Canada

Alberta’s auto insurance system is facing some of the highest cost pressures in Canada , according to new data from the General Insurance Statistical Agency (GISA), a statistical agency created and overseen by provincial insurance regulators.

Legal costs now account for a greater portion of the auto insurance premiums drivers pay in Alberta than anywhere else in Canada. Costs from litigation and legal fees are twice as high as Ontario, and over three times as in some Atlantic provinces.

GISA data also shows that Alberta ranked second in Canada for the amount spent per claim to repair vehicles as well as the frequency at which vehicles are stolen. With auto insurance premiums already among the highest in the country, rates in Alberta are likely to rise if these pressures are not urgently addressed by the province.

“Alberta’s insurers are keen to work urgently with the government to tackle the cost pressures facing premiums and find ways to improve the affordability of auto insurance for drivers,” said Aaron Sutherland, Vice-President, Pacific and Western, Insurance Bureau of Canada (IBC). “Unfortunately, the action taken to date – including Alberta’s rate cap for good drivers – does not address the costs underlying drivers’ coverage and will do little to improve the price drivers are paying moving forward.”

Auto insurance premiums in Alberta continue to face pressures due to a variety of factors, including the following:

• Lawsuits and legal costs associated with insurance claims have soared 31% in Alberta since 2018 and now account for 20% of mandatory premiums.

• Bodily injury costs related to third-party liability (i.e., legal costs) will rise a projected 5% in 2024.¹

• Accident benefit costs will rise a projected 11% in 2024.²

• Spending on vehicle parts and repairs was up 3.5% in December 2023. Over the last three years, these costs have risen 18% in Alberta.

• The Alberta health care levy on auto premiums went up 28.2% in 2023.³

• Cash settlements for minor injuries under Alberta’s Minor Injury Regulation went up 4.2% in 2023.

• More vehicles are being stolen. According to the latest data, the cost of vehicle thefts is up 39% across Alberta.⁴

While the provincial government continues to explore long-term reforms, IBC has put together a list of opportunities to address auto insurance affordability. If implemented, these measures could save drivers on average $325 a year.

1. Take urgent action to reform the auto insurance system. IBC’s “Enhancing Care & Expanding Choice” proposal gives drivers more control over their coverage, while doubling the care provided to those injured in collisions. Best of all, it could save drivers, on average, up to $200 on the required premium.

2. Fix the Grid. Alberta’s Grid framework is bad public policy and charges safe drivers more to subsidize the premiums of high-risk drivers with a history of at-fault claims and infractions. The Grid works against the very thing the government seeks to encourage – safe driving. It’s time this subsidy is removed.

3. Axe the insurance premium tax and provincial health levy. The government charges a hidden 4% premium tax on every auto insurance policy. Removing this tax would save drivers approximately $65 per policy. In addition, the province charges a health levy on auto insurance, adding another $30 per policy.

For more information, visit www.albertaautoinsurancefacts.ca/.

¹_{AIRB Semi-Annual Review.}

²_{AIRB Semi-Annual Review.}

³_{Statistics Canada, December 2023.}

⁴_{Équité analysis of GISA data.}