Alberta finance minister instructed to address rising auto, home insurance costs

Alberta's finance minister must recommend ways the provincial government can make car and home insurance more affordable, says his mandate letter from Premier Danielle Smith.

With a Dec. 31 expiry date looming on a temporary auto-insurance rate pause in Alberta, Finance Minister Nate Horner is tasked with developing short-term and long-term solutions to ever-climbing insurance costs.

Horner said he is resisting pressure to adopt a no-fault auto insurance system, adding that such a major change would need a mandate from Albertans.

"You're basically giving up your ability to sue," he said in a Thursday interview. "If you're hurt in a way that will impact your life, for the rest of your life, is it worth it for you to have a little cheaper insurance now and not have that right on the other end, if you're hurt in a major way?"

In January, the government temporarily froze approval of any new auto-insurance rate increases while civil servants studied mechanisms to cool down rising premiums.

"We do know there's pressure built up within the rate system," Horner said. "So we want to come up with everything we can think of."

Horner didn't divulge any clues about what the province is considering. He said he wouldn't contemplate a private, no-fault insurance system unless it's "the only answer" to reducing costs.

Horner's predecessor, Travis Toews, previously appointed a panel to study the issue. In 2020, the panel recommended Alberta adopt a no-fault system, which members said would reduce premiums by a little less than 10 per cent for a driver with full coverage.

Toews opted instead to make smaller insurance reforms: having insurance companies directly compensate clients' repair costs, allowing insurers to bill by the kilometre and changing the definition of minor injuries.

Insurance Bureau of Canada (IBC) numbers show the average price of auto premiums in the province rose about 25 per cent between 2018 and 2022.

Some Alberta injury lawyers say the province should keep its tort insurance system and consider other reforms — such as capping the profits insurance companies can earn from premiums.

Injury lawyer Nainesh Kotak practises in Ontario and Alberta. He said Ontario's insurance system, which limits the awards for pain and suffering due to a collision, has left badly injured victims without proper compensation for their treatment and loss of income.

Kotak said adopting a no-fault system in Alberta would be "catastrophic."

"You would lose what's called access to justice."

When Ontario made the change in the 1990s, the cost relief on premiums was temporary, he said.

Kotak said Ontario drivers now pay the highest insurance rates in the country for some of the worst benefits.

Insurance companies applying to provincial regulators for premium increases should have to provide independent audits of their profits, he said.

In a January 2023 letter to United Conservative Party caucus members, the Alberta Civil Trial Lawyers Association asked the government to legislate a seven per cent profit limit on insurance premiums and create a consumer protection watchdog for insurance.

Insurance industry wants systemic changes

Karamveer Lalh, an Edmonton injury lawyer with James H. Brown and Associates, said Alberta also has a grid that prevents insurance companies from charging higher rates to drivers with bad records.

He said it's led to a system where good drivers are subsidizing the bad, and axing the grid could help reduce premiums for good drivers.

The IBC did not respond to a request for an interview on Thursday. However, a March 2023 report on the organization's website proposes changes to prevent premiums from climbing further.

Rising legal costs and more expensive vehicles and components, plus a rebound in traffic since the COVID-19 pandemic hit, is driving up insurance costs, the report says.

IBC recommends giving Alberta vehicle owners more insurance choices, such as waiving the right to claim compensation for minor injuries in exchange for paying lower premiums. It says Albertans should retain the ability to sue for major injuries.

IBC also recommends the province reduce the bureaucracy around applications for rate increases, abolish the rate cap grid, and make it easier for companies to deny insurance when there is evidence of fraud.