Alberta no longer sure about big savings from auto insurance reforms

When Premier Danielle Smith announced a dramatic shift to a new auto insurance system that largely removes Albertans' rights to sue at-fault drivers for compensation, she and her ministers dangled the prospect of big discounts for motorists.

"These better, faster services would be delivered at a savings of up to $400 per year on insurance premiums," she said at the November announcement.

Standing behind a lectern that said "keeping Alberta affordable," Smith outlined major reforms to a system that has remained the second-most expensive among all Canadian provinces.

The $400 figure, taken from an expert report on insurance reforms, has kept popping up in UCP government messages since then, including in a promotional video released in April. It repeated the claim alongside an image of a woman looking at her laptop and smiling wide, as the outline of a piggy bank appeared over her head. "It's better for your wallet, and if you're injured in an accident, it's better for your health," the voiceover actor stated.

But in a government report released Aug.6 that's full of details on how auto insurance will work when the new system arrives in 2027, $400 in savings never gets mentioned. Nor do any claims or suggestions about how much, exactly, driver premiums will drop by, thanks to this big overhaul.

An Alberta Finance official stated earlier this week that the initial $400 cost savings figure was devised using 2023 insurance data. Various pressures have since pushed up the cost of providing insurance, ranging from inflation to U.S. tariffs on steel and car parts, to Calgary's hail storms and the Jasper wildfire. The government will perform additional actuarial analysis to help better predict the pricing impact of the new model, the official said.

Finance Minister Nate Horner offered a new explanation about the savings claim he and Smith made last fall.

He pointed to the fact Alberta has capped this year's premium hikes for good drivers at 7.5 per cent this year, while the government estimate that private insurers lost money on auto coverage last year, to the tune of 19.6 per cent. The rate cap is now keeping rates "artificially low," the minister said Wednesday.

"I would look at it this way, and this is where it's tough to communicate: they may already be seeing a $400 per premium savings due to the good driver rate cap," Horner told CBC News in an interview. In other words, without the rate cap insurers might have charged Albertans around $2,100 a year instead of the $1,703 average premiums they now pay, the minister is reasoning.

Smith and Horner first floated the $400 savings last fall in conjunction with letting insurers hike rates this year by up to 7.5-per-cent rate and 7.5 per cent in 2026 as well — pending review — after past years of lower caps and rate freezes.

Given how "fragile" the system is now thanks to cost woes, Horner said, he would not commit to keeping next year's hike at 7.5 per cent, saying it will depend on a statistical analysis.

"I promised the Premier and Cabinet that I will bring something forward this fall for their consideration… I can't tell you what will come out of that."

The insurance sector wants the rate cap lifted, and has begun making similar warnings that big savings will not materialize come 2027 through Alberta's insurance system redesign.

Aaron Sutherland, a vice-president with the Insurance Bureau of Canada, not only highlighted the tariffs and climate disasters — he also cited the government's promises this new system will offer Canada's richest benefits for the injured and also preserve more ability to sue than other provinces with "no-fault" insurance systems.

"When you take all of that in totality, it's very hard to see how this is going to deliver savings at this time, unless we see significant change in the direction that the government's charting," Sutherland said.

While other provinces call insurance regimes without injured victims "no-fault," the Alberta government has branded its reforms "Care First." That's because insurance companies can more quickly determine what the compensation and health care a collision survivor is entitled to, rather than making them wade through a lawsuit or legal mediation.

The United Conservative cabinet decided to move to this system to tackle what government says is the "single biggest reason" for rising insurance costs: litigation and bodily injury claims. A recent provincial review said the average claim cost rose from $91,000 in 2020 to $180,000 in 2024.

The reform "isn't going to produce any premium savings and it'll take away civil liberties. Now the insurance industry is telling the government the same thing," said Owen Lewis, a Grande Prairie lawyer and former president of the Alberta Civil Trial Lawyers Association.

"They've been sold this lie that the only way to reduce premiums is to focus on what injured Albertans receive."

Horner in November promised the new system wouldn't completely quash victims' ability to sue at-fault drivers like no-fault systems in provinces like Manitoba and British Columbia, but would offer "the biggest window of court access" of its peers.

The province's new 23-page report on insurance reforms spells out the cases: an at-fault driver can be sued if they're convicted of murder or a Criminal Code driving offence like hit and run or driving with a suspended license; convicted of provincial offences of impaired driving or failing to stop for a peace officer; or if a victims's out-of-pocket expenses exceed their insurance policy.

Distracted driving or ignoring a red light would no longer be grounds to sue in the new regime.

Lewis said the government's limited range for legal claims would amount to around one per cent or less of client calls his firm currently receives. A provincial report last year forecast that moving to a no-fault system would axe 650 to 800 legal sector jobs in Alberta.

Sutherland from the Insurance Bureau, meanwhile, argues that the province can chop more costs from the system and ease premiums by further limiting the right to sue.

"They were clear they didn't want to see any tort [legal] access, but we tried to find a balance that we thought Albertans would appreciate," Horner said.

But the minister also signalled no intention to further expand access, as lawyer groups want.

"The larger the tort window, so to speak, the more expensive the system is."

Whether any $400 in savings come in 2027 like the province used to say, or maybe the invisible current savings Horner has hinted at tied to rate caps, the government is promising that a system with a new way of handling injury claims outside the court system will be better at keeping prices more stable beyond 2027.

"But Albertans should feel confident we're moving to a better system that will cost less than in the long term," Horner said. "It's just — we've kind of muddied the waters and it's harder to see."