Auto insurance companies exit Alberta: Reaching a crisis point?

Albertans are facing some of the highest auto insurance premiums in the country. Despite this, several insurance companies are finding it increasingly difficult to turn a profit in the province. Recently, three auto insurers, including Zenith Insurance, Sonnet Insurance Company, and Aviva subsidiary S&Y, have announced their departure from Alberta. These exits highlight a brewing crisis in the auto insurance market.

Reasons for the Crisis

• High Claim Costs: Insurers point to claim costs that exceed the premiums collected, making it difficult to maintain profitability.
• Litigation Costs: Alberta’s legal environment allows for more legal claims compared to other provinces, which can increase costs for insurance companies. This includes higher payouts for pain and suffering and an increasing number of lawsuits. Insurance companies try to maximize their profit by denying legitimate injury claims.
• Repair Costs: The cost of vehicle repairs has surged due to the impacts of the pandemic, inflation, and higher rates of fraud and theft.

Government Response and Rate Caps

Over the years, the Alberta government has implemented measures to control premium increases:

• Under former NDP Premier Rachel Notley, annual rate increases were capped at five percent from 2015 to 2019.
• In 2023, the United Conservative government reintroduced a rate freeze for drivers with clean records and capped rate increases at 3.7 percent.

However, these caps are seen as temporary fixes that do not address the underlying cost issues.

Comparisons to Other Provinces

Unlike Alberta, provinces like British Columbia, Saskatchewan, and Manitoba have public auto insurance systems. In Alberta, drivers can sue the at-fault driver’s insurance company for both minor and major injuries.

Potential Solutions

The insurance industry has proposed several solutions to alleviate the crisis:

• Opt-Out for Minor Injury Lawsuits: Allow drivers to choose lower premiums by waiving the right to sue for minor injuries, while retaining the right for serious injuries.
• No-Fault Insurance Model: Shift entirely to a no-fault system, where each driver’s insurer covers their own costs, regardless of fault. This would likely reduce average payouts but also lower premiums.
• Public Insurance System: A government-commissioned report suggested that a public auto insurance system could save Albertans hundreds of dollars a year in premiums. However, Premier Danielle Smith has indicated there is little public appetite for such a move.

Considerations

The exit of several insurers does not spell a doomsday scenario for Alberta. While some suggest a shift to a no-fault insurance model or a public insurance system, it’s important to learn from the detrimental system in B.C. where injured individuals can no longer file a legal claim. Ontario faced a similar situation in the 1990s when Bill 164 replaced the Ontario Motorist Protection Plan (OMPP).

In Ontario, accident benefits are quite modest for most injury claims, which contrasts sharply with the higher costs seen in Alberta. The reality is that there are a variety of models that could work, balancing accident benefits, tort, repair costs, and insurers’ profit margins. One extreme does not justify the other.

There needs to be a balanced approach focused on protecting the public and ensuring that individuals who are injured receive the compensation they need, especially when they are unable to work or require ongoing medical care.

Rights After a Car Accident in Alberta

For those seeking more information and legal guidance about car accidents in Alberta, the dedicated car accident lawyers for Calgary and Edmonton at Samfiru Tumarkin LLP are here to support you.

We understand the overwhelming challenges you face after a vehicle accident and are committed to fighting for your rights. Our compassionate and experienced personal injury lawyers offer free consultations to guide you through the legal process and ensure you receive the full compensation you deserve. Your recovery is our priority.