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