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Courtrooms and lawyers’ offices in Alberta are set to become less busy next year, when changes to the province’s auto insurance market take effect.
The province is moving to what it calls a “care-first,” or no-fault, system from its current tort model starting Jan. 1, 2027. That means insurers will be required to bolster medical and income support as well as other benefits for those injured in collisions, regardless of who is at fault, instead of parties having to battle it out in the justice system for compensation beyond the limited amount insurance now covers.
The Insurance Bureau of Canada has welcomed the change, saying it will drive down legal costs for its members and in turn lower premiums for drivers.
“The care and benefits that are provided to those injured in collisions are going to increase. They’re going to be the richest in the country,” said Aaron Sutherland, vice-president for Western Canada and Pacific at IBC.
“That’s a win for drivers and anyone injured in collisions and we’re keen to work with the government to see this new system come to fruition.”
But a legal advocacy group has warned it takes away a crucial avenue for recourse and puts too much power in the hands of insurers.
Auto insurance premiums and delivery models vary province by province. Some, like British Columbia, Manitoba and Saskatchewan, deliver mandatory coverage through Crown corporations, whereas in Alberta, Ontario and elsewhere, it’s left up to private insurers.
Albertans pay among the highest premiums for auto insurance in Canada and the provincial government has said the changes would shave off up to $400 per year of those costs. IBC has said rising legal expenses make up one fifth of what drivers pay.
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While “care-first” will be a help, Sutherland said more needs to be done to cure what’s ailing the province’s insurance market.
The 2024 annual report from the Superintendent of Insurance published last month painted a grim picture. It found a substantial majority of Alberta auto insurers were unprofitable that year, with private passenger automobile insurance taking the biggest hit.
Auto insurers’ expenses that year exceeded revenues by a collective $1.2 billion, the report said, with claims and expenses outpacing premiums by 18 per cent.
It forecast that escalating claims costs would continue to exceed the province’s Good Driver Rate Cap, which limits premium increases to 7.5 per cent a year for drivers without at-fault claims in the previous six years, criminal convictions in the previous four years or other convictions in the previous three years.
The rate cap, which is meant to be temporary, is set to last at least until the end of this year.
“In any industry, if you are forced to sell a product below the cost of providing it, that’s not a recipe for success or a healthy competitive marketplace,” Sutherland said.
A handful of companies, including Sonnet and Zenith, have exited the Alberta auto insurance market, while others have scaled back their offerings.
“I don’t expect anyone to shed a tear over the financial plight of the insurance industry in Alberta. But what does it mean for drivers? It means less choice, fewer options, more expensive premiums,” Sutherland said.
“We’ve got a competitive market that’s been in crisis, that’s been pulling back, and it’s been drivers that are footing a higher bill as a result and facing significant challenges securing the coverage they need.”
Adding to the pressures in Alberta is the fact that it’s been “the disaster capital for Canada” over the past several years, Sutherland said. For instance, a 2024 hailstorm in Calgary caused more than $3 billion in insured property damage within a single afternoon.
Vehicle theft is also a growing problem, with claims 76 per cent higher in the first half of 2025 than they were in 2021.
Once the “care-first” changes take effect, there will be no other system like it in Canada, said Owen Lewis, past-president of the Alberta Civil Trial Lawyers Association.
Lewis, a partner at KMSC Law in Grande Prairie, Alta., said he’s concerned about what checks and balances there will be in a system dominated by for-profit players, even though the province is planning an independent tribunal to resolve disputes over benefits.
“You’re going to have individuals who are required to navigate a system that, quite frankly, is extremely confusing for me,” he said.
“And they’ll be required to try to navigate that on their own to go against insurance companies that are well-funded, will have their own lawyers, have their own specialists to argue against the individual claim.”
Albertans would still be able to sue if the at-fault driver is convicted of a serious Criminal Code or Traffic Safety Act offence. But it would be “extremely rare” for someone to collect under those circumstances, Lewis said.
Lewis agrees that the status quo is not tenable for insurers in Alberta, but disputes that legal costs should bear so much of the blame.
“You can’t revamp an entire system and take rights away from innocent injured individuals to try to resolve a problem that isn’t created by injured Albertans.”
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