Fact Check

Let’s make auto insurance in Alberta affordable

Everyone wants an auto insurance system that works well for Alberta’s 3 million drivers. Unfortunately, the system is marred by high costs for both consumers and insurers. The reason for these sky-high costs can be traced back to one issue – inflated claims costs draining resources from the auto insurance system.

There was a time when Alberta’s auto insurance system worked well. In 2004, Ralph Klein introduced auto insurance reforms through two key regulations – the Minor Injury Regulation (MIR), and the Diagnostic Treatment Protocols Regulation (DTPR). Together, these regulations were designed to keep claims costs and premiums stable, while ensuring that injured claimants had access to more pre-approved medical care following an accident.

The MIR is essentially a cap that limits pain and suffering awards to $4,000, for claimants having minor injuries. (With inflation, this number now stands at $5,296.)  While people claiming pain and suffering damages for minor injuries have their awards for these capped, there are no caps for people who sustain non-minor injuries. Furthermore, there are no restrictions on suing for lost wages and medical expenses. The DTPR also allowed accident victims to access treatment and care right away, no questions asked.

The result was a system that focused on people recovering from their injuries and not on winning awards in court for sprains and strains.

Then in 2012 and 2015, two court cases held that based on how the MIR was written, certain injuries that are considered minor/common in other jurisdictions are not to be considered minor under the current MIR. These decisions were made even though, according to the medical literature, these types of injuries generally heal in weeks or months and are often considered minor elsewhere in Canada. As a result, claimants having these injuries were not bound by the pain and suffering damages cap and claimants began to sue for amounts far greater than the cap amount.

The numbers from the government’s actuary, Oliver Wyman, show very clearly the consequences for this vulnerability in the MIR. Claims costs have soared, and bodily injury claims now account for more than half of the increase in total claims costs. Three other independent actuaries have come to similar conclusions – so we know the data is concrete.

In fact, since 2011 average claims costs associated with bodily injury (driven by court costs and the administrative fees associated with these claims) increased by about 8% per year: from $41,887 in 2011 to $74,946 in 2019. Today, because of these changes, insurers pay out an average of $1.09 for every $1 they earn, and – most importantly – Alberta drivers have the second highest premiums in Canada among provinces that provide private auto insurance.

Who wins in this scenario? It’s not Alberta’s drivers, who pay high premiums thanks to out-of-control claims costs, and it’s not the insurance industry, which doesn’t want to charge their consumers more nor continue to lose money under the status quo.  he current situation – the status quo – does not work for most people and if special interest groups put their own profits aside they too would focus on cost cutting reforms.

It’s time to fix the system. Changes to the auto insurance system mean more money for other things for Alberta drivers. It’s that simple.

Updated October 5, 2020

The facts about auto insurance reform

Our current auto insurance system isn’t working for Alberta’s 3 million drivers. Premiums have continued to rise and consumers who want to keep their insurance affordable don’t have many options. This is why the insurance industry is working with the government of Alberta to fix the system. The insurance industry wants to see much-needed reforms that will keep premiums affordable for drivers, while offering more choices in coverage and better care after a collision.

A lot of information about what the insurance industry is advocating for is being shared, and not all of it is accurate. With so much noise online and in the media, it can be hard to separate fact from fiction. To help Albertans figure out which is which, this FAQ provides the facts about some of the most talked about auto insurance reform topics.

Is the insurance industry advocating for a change to a no-fault system?

No. Insurance Bureau of Canada and the insurance industry have never advocated for a no-fault system in Alberta. The industry is advocating for balanced changes to the current auto insurance system that will stabilize premiums and keep them affordable, while increasing choice for consumers and providing better care for those who need it.

Why do costs need to be removed from the system?  

Removing costs from the system lessens the financial burden on drivers. This means taking a hard look at what’s contributing to rising claims costs, and what claims costs are not benefiting consumers. Bodily injury (BI) claims – which have increased by a staggering 80% since 2011 – are the primary cause of premium increases.1  Lawyer fees and other costs when a claim goes through the court system are a big driver of BI costs and are ultimately passed on to all Alberta drivers. Reducing these costs will benefit consumers.

Are insurers trying to take away a driver’s right to sue after an accident?

No. All consumers would still have the right to sue for damages such as lost income and future medical care, especially in the event of severe or catastrophic injuries.

The suggested insurance product will focus on providing Albertans injured in collisions with the best care available so they can get the treatment they need to recover from their injuries.

As a way to better manage costs, the insurance industry is advocating for a made-in-Alberta solution that allows consumers to tailor their insurance premiums to suit their needs. One change gives consumers the option to pay a lower premium if they forego the right to sue for pain and suffering associated with minor injuries. Consumers who want the ability to sue for pain and suffering in cases where minor injuries are involved have the ability to purchase that option. Either way, all consumers can still sue for items like lost income and/or future medical care needs.

What does focusing on care really mean for drivers injured in a collision?

The auto insurance system in Alberta currently focuses on providing cash settlements rather than giving collision victims prompt access to the care they need to recover from their injuries. If Alberta’s insurance system sticks with the status quo, nothing will change – premiums will continue to rise as BI claims costs increase, and collision victims will continue to suffer because they won’t have access to much of the care they need while they wait on lengthy court proceedings. The insurance industry’s proposed reforms will give Albertans access to more timely, pre-approved medical care for minor injuries to help them recover more quickly. Most importantly, treatment options would be based on prevailing medical literature from doctors and experts, not decided by the insurance industry.

Under these reforms, who will determine what care collision victims receive?

The insurance industry believes anyone with an injury should get the care they need, when they need it. We also believe treatment should be based on prevailing medical literature by doctors and health care experts, and not decided by insurers or lawyers. The insurance industry’s proposed changes will give all consumers across the province greater control over their premiums and gives accident victims access to more timely, pre-approved treatment to return to their lives instead of waiting for a claim to work its way through the court system.

Why is the insurance industry advocating for changes to the definition of a minor injury?

In 2004, the Alberta government capped pain and suffering awards for minor injuries to help control rising BI claims costs and stabilize premiums. The system then enjoyed nearly a decade of stability. But legal challenges in 2012 and 2015 resulted in certain common, minor injuries no longer being subject to the cap. Many minor injury claims received court awards in line with more serious injuries, significantly increasing the costs of claims and premiums for Alberta drivers.

Today, the definition of a minor injury in Alberta goes well beyond the scope of what is considered minor in other provinces and doesn’t align with prevailing medical literature. That is why the insurance industry is asking regulators and the government to update the definition of a minor injury. For collision victims, this would mean re-establishing that minor injuries would be those that health care experts deem common and that are expected to heal in weeks or months, such as sprains, strains and whiplash. More severe injuries that typically take much longer to heal, such as broken bones, would not be considered minor.

Want to know more? Read about the changes the insurance industry is advocating for at Driving Change: Auto Insurance That Works.

1Sources: 2020 Oliver Wyman Annual Review Report (2015-2019 Data, page 16), 2019 Oliver Wyman Annual Review Report (2014 Data, page 14), 2018 Annual Review Report (2012-2013 Data, page 15), and 2017 Annual Review Report (2011 Data, page 24). Oliver Wyman is the Alberta Automobile Insurance Rate Board’s consulting actuary.

Updated August 25, 2020

Alberta’s insurance industry is local and an essential part of the communities we serve.

Today, 45 private passenger auto insurers operate across the province employing thousands of people who live and work in the same communities as their clients. Although some detractors want Albertans to think of insurance professionals as outsiders, nothing could be further from the truth. We are members of your community, and we are on the ground every day and ready to support our fellow Albertans when they need it most.

We are also some of the more than 3 million drivers across the province who know the current auto insurance system isn’t working. That’s why Insurance Bureau of Canada (IBC) and the insurance industry continue to advocate for balanced changes that will keep auto insurance affordable and increase choice and care for those who need it.

Being a part of the community and understanding the issues that drivers face in Alberta is important to IBC. It has a team in Edmonton that works with the Government of Alberta and the Auto Insurance Advisory Committee to improve auto insurance for drivers across the province. It also has a local consumer information centre where trained industry personnel answer thousands of inquiries each year from consumers just like you.

Check out how Alberta’s insurance industry supports the local economy:

  • In 2018, 10,842 people worked in Alberta’s property and casualty (P&C) insurance industry
  • For every 100 jobs created in Alberta’s P&C insurance industry, 42 jobs are created in other areas of the province’s economy
  • The total economic footprint associated with the P&C insurance network supports about 1 in every 150 jobs in Alberta (“footprint” refers to the sum of the industry’s direct, indirect and induced economic impacts)
  • The P&C insurance industry contributes significantly to Alberta’s economy, paying approximately $375 million in premium taxes and $155 million in health care levies in 2017 and directly contributing about $1.2 billion to Alberta’s GDP in 2018.

Video: Alberta’s Insurance Industry is Local & Essential

Source: Conference Board of Canada Report – Alberta’s Insureconomy: The economic contribution of the property and casualty insurance industry – commissioned by IBC (July 2019).

Updated August 7, 2020

Insurers are advocating for balanced changes, not no-fault insurance.

While FAIR Alberta, a group funded by personal injury lawyers, continues to claim that Alberta’s auto insurers and IBC are pushing for no-fault auto insurance, their claims aren’t supported by the facts.

IBC and its members are advocating for balanced changes that will keep auto insurance affordable while providing the choice and care Alberta drivers deserve. The insurance industry’s recommendations to the Government of Alberta and the Auto Insurance Advisory Committee are publicly available and can be found here.

Alberta drivers can learn more about how IBC and the Insurance Brokers Association of Alberta are contesting FAIR Alberta’s claims in a July 7 article on Canadian Underwriter.

Updated August 7, 2020

Response to FAIR post: “Insurance companies in Alberta set to rake in almost $1 billion in pre-tax profit over 2019 and 2020”

In a June 17 post to their website, FAIR, a group funded by personal injury lawyers, must have used a crystal ball to claim that insurers will make $1 billion in pre-tax profits in 2019 and 2020. But as in the majority of FAIR’s reports, the data is wrong.

The General Insurance Statistical Agency, whose data FAIR insists it uses, has not reported on claims costs for 2020 – since the year has not ended – and it does not predict claims costs. It collects data on what has already happened. The assertion that the industry will make a $1 billion profit is based on FAIR guessing what claims costs will be in response to the COVID-19 pandemic. This is like guessing how many jelly beans are in the jar – it’s far from accurate. Further, it does not take into account the significant auto related claims companies are addressing following flooding in Northern Alberta and hail in Calgary.

IBC and its members believe that Albertans deserve affordable auto insurance. And we’ve made recommendations to the government on how to achieve this goal while ensuring that Albertans have the ability to choose the coverage that makes sense for them and the ability to access the care they need if they’re in a collision. Our recommendations are not what FAIR claims and can be publicly found here.

FAIR’s assertions do beg the question: How much will lawyers make over 2019 and 2020? Who knows? They aren’t legally required to disclose their earnings. Perhaps one question we should all be asking is: What’s motivating FAIR? Regardless, Alberta’s insurers will be focusing their efforts on affordability for drivers.

Updated June 28, 2020

Honesty in Insurance – The Facts that Drivers Deserve

Alberta’s auto insurance system isn’t working for its 3 million drivers. Drivers have said they want affordable premiums, more choice, and care when they need it. To deliver a system that Albertans want, we need to examine and consider reliable data.

Unfortunately, on February 13, a group funded by personal injury lawyers, released data they claim is based on a report from Oliver Wyman (the government’s actuary). However, not one of the numbers they cite in their release can be found in the government’s report. Not one.

The fact of the matter is, the report – that is available to the public – shows that between 2015 and 2018, bodily injury costs per vehicle increased by 20%, and the average claim size increased by 25% over the same period of time. It also shows that this trend has been going on for many years.1 Indeed, the report confirms that based on the most recently available data, bodily injury costs per vehicle increased by an average of 7.1% per year since mid-2011. What does this mean for the Alberta driver? Costs in the auto insurance system are increasing.

The government report also projects that many insurance costs will increase over the next year, including bodily injury costs per vehicle (up 7%) and accident benefits (up 8.5%), and that comprehensive losses (theft and weather-related claims) will also increase by 6.5%.

These are the facts. According to data from the Alberta Automobile Insurance Rate Board, insurance claim costs are on the rise. To suggest otherwise is incorrect.

Alberta’s auto insurers want to reduce costs and give consumers an auto insurance system they want and frankly, deserve.

1Page 54/142, column 14 – from 2012.1 to 2019.1

*Data is for the prior 12 months up to June 30 of each year

Updated February 28, 2020

Letters to the Editor

RE: Opinion – Albertans should brace for impact. Smoky River Express, February 26, 2020

Alberta’s 3 million drivers deserve an auto insurance system that works for them. In that much, I hope MLA Carson and I can agree. But not on much else.

The auto insurance industry warned his government for years that the system needed to be fixed. Yet, in four years, they did nothing to address rising costs or make the system more accessible for drivers. If MLA Carson’s government had made the minor changes that were required and that insurers pointed out five years ago, consumers would be paying less for auto insurance today. It’s as simple as that.

Now we are well past the point of small tweaks and need major changes to fix the system. Consumers have experienced premium increases, though the average increase is around 10%, not the 30% MLA Carson is suggesting. Drivers should shop around to find the best price. You have options.

Today, all stakeholders involved in the auto insurance industry should be working toward a better solution that meets the needs of Albertans. It seems MLA Carson is getting his facts from analysis provided by FAIR Alberta Injury Regulations, a group funded by the Alberta Civil Trial Lawyers Association. A group that, last week, released data they claim is based on a report from Oliver Wyman (the government’s actuary). Yet not one of the numbers they cited can be found in the government’s report. Not one.

We encourage all stakeholders, regardless of what stake they have in the automobile insurance system, to work with the Alberta Automobile Insurance Advisory Committee on outcomes that will improve the system. Alberta’s drivers deserve nothing less.

Celyeste Power
Vice-President, Western
Insurance Bureau of Canada

Updated February 26, 2020

RE: Car crash injury claims aren’t increasing, insurance can handle costs: report – Edmonton Journal, January 21, 2020

Alberta’s three million drivers deserve an auto insurance system that works for them.

All stakeholders involved in this industry should be working towards a better solution that meets the needs of Albertans. To find this better solution requires taking a good look at the long-term data trends and not short term results that do not paint a full picture of what is happening to drivers.

This is the challenge with the report cited in this article. The report, released by a group created by the Alberta Civil Trial Lawyers Association, asserts that bodily injury claims are not the main reason for increasing costs in the auto insurance system. The data presented in this report ignores all of the long-term claims history that is well-documented publicly, by numerous actuaries, including the independent rate regulator’s actuary.

It’s like saying unemployment in Alberta is no longer an issue because there was an increase in job creation during a one month period. That is, clearly, not accurate. Why? Because trends in any data set are not found in short-term pictures, they develop over time.

In addition, while the report’s author agrees that claim costs from bodily injury have increased since 2012, the report fails to mention that these claims costs (which are the costs from settling injury claims after a collision) have not just increased a little bit – they are, in fact, up by 80% since 2011. These numbers are directly from the independent rate regulator’s actuary, and available on its website.

The article also mentions that these bodily injury claims are the reason the rate cap was removed. This is incorrect. The rate cap did nothing to fix claims costs, it simply asked Albertans to pay more down the road.

The auto insurance system in Alberta no longer works for the drivers that depend on it. Drivers deserve affordable premiums, choice and the care they need if they are in an accident.

We encourage all groups, regardless of what stake they have in the system, to work with the government’s Expert Committee on Auto Insurance to develop outcomes that will improve the system. Alberta’s drivers deserve nothing less.

Celyeste Power
Vice-President, Western
Insurance Bureau of Canada

Updated January 21, 2020