In response to rising questions and concerns from residents about the upcoming changes to Alberta’s auto insurance system, the government has launched a new website to try to quell anxiety and provide details on the proposed Care-First model and rate cap increases starting in January 2025.
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What’s changing in 2025?
Beginning in January 2025, good drivers will see a rate cap increase to 7.5 per cent. This includes a five per cent annual cap and an additional 2.5 per cent allowance to cover costs related to natural disasters, such as the 2024 Jasper wildfire and Calgary hailstorm. The province noted that the rate cap protects good drivers from substantial rate hikes while ensuring that insurance providers remain financially viable.
In 2024, good drivers had their rate increases capped at 3.7 per cent, and those who missed this cap due to insurer timing will also be capped at 3.7 per cent in 2025, provided they still qualify as good drivers.
A good driver is defined as someone who has had no at-fault accidents in the last six years, no criminal traffic convictions in the last four years, no major traffic violations in the last three years, and no more than one minor traffic conviction in the last three years.
What exactly is the Care-First System?
According to the government, The Care-First model is designed to provide better recovery outcomes for all individuals injured in collisions, including at-fault drivers. Under this system, those injured will have access to significantly improved medical, rehabilitation, and income support benefits, with coverage lasting throughout their recovery.
Unlike the current system, which limits medical and rehabilitation benefits to $50,000 over two years, the Care-First model provides unlimited access to medical care for life, similar to the system in Manitoba.
Income support will increase under Care-First, covering up to $120,000 in gross income annually, with options for additional coverage. A one-time permanent impairment benefit of nearly $300,000 will be available for those with more serious injuries. The system will also provide benefits for grief counselling, death benefits, and out-of-pocket expenses.
The government also underlined that injured Albertans will still have the ability to sue an at-fault driver convicted of a criminal offence, such as impaired driving or dangerous driving, or conviction of certain offenses under the Traffic Safety Act.
"They will also be able to sue for out-of-pocket expenses beyond their insurance coverage."
Why a private delivery model?
While many provinces use a public delivery model for auto insurance, Alberta’s government has opted for a private one. The government believes that Albertans value the ability to choose their insurer, promoting a competitive market. An economic analysis revealed that establishing a public insurer would cost taxpayers nearly $3 billion and require millions to operate annually.
Implementation timeline and legislative framework
The Care-First system will be implemented over the next two years. Legislation to introduce the necessary reforms is scheduled to be introduced in spring 2025. The government aims to deliver approximately 3.4 million new policies by 2027, and the full system is expected to be fully operational by January 2027.
Reactions to the reform
The Insurance Bureau of Canada (IBC) has mixed reactions to the reforms. While Vice-President Aaron Sutherland supported the increased benefits, he cautioned that continuing the rate cap could negatively impact the competitiveness of Alberta’s auto insurance market. Sutherland pointed to rising legal costs as a key factor driving premiums higher.
On the other hand, NDP Shadow Minister Court Ellingson criticized the rate cap increase from 3.7 per cent to 7.5 per cent, arguing that it could worsen financial pressures for Albertans already dealing with inflation and high unemployment rates.
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