Drivers are facing an uphill battle as skyrocketing legal costs and litigation fees linked to auto collision claims contribute to record-high insurance premiums. With the average legal settlement for auto insurance claims surpassing $100,000 in 2023—setting a new national benchmark.
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Recent data from the General Insurance Statistical Agency (GISA) reveals that Alberta drivers now pay more than three times the national average in legal-related insurance costs. This alarming trend has sparked urgent calls for reform.
GISA's statistics show that auto insurance settlements in Alberta have surged by an astonishing 116 per cent over the past decade. As a result, drivers in the province face insurance premiums that are more than three times higher for costs linked to legal fees and litigation than those in other provinces.
Aaron Sutherland, Vice President of the Insurance Bureau of Canada (IBC), emphasized the need for a transparent discussion about rising premiums.
"It's critical that those injured in a collision receive the benefits they need to recover. However, aggressive marketing tactics from personal injury lawyers are encouraging many collision victims to file frivolous claims, impacting the cost of auto insurance for all Albertans," he stated.
A recent report by professional services firm MNP corroborates this troubling trend. It shows a staggering 48 per cent increase in the frequency of lawsuits following collisions between 2018 and 2022. During that period, more than $1.2 billion was spent on litigation costs related to auto accidents. Notably, when a claim is litigated, legal expenses often exceed cash payments for pain and suffering by more than double.
These growing legal and cost pressures on auto insurance premiums exceed the current provincial rate cap, creating significant market challenges. Several insurers have either withdrawn from Alberta or limited their coverage options, citing that the costs of delivering auto insurance have become unsustainable under the existing rate structure.
Sutherland called for urgent action from the Alberta government, stating, "There is no longer any debate. The Alberta government must move urgently to eliminate the rate cap and implement changes to improve driver affordability. Only meaningful action to address the cost pressures in the system, including legal costs, can achieve this. Alberta's insurers are eager to collaborate with the government to make necessary changes."
Additionally, MNP's recent report indicates that the province's auto insurance rate cap adversely affects drivers. The report forecasts an alarming 87.6 per cent increase in premiums over the next decade unless reforms are enacted to address the ongoing trends.
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