Alberta introduces no-fault auto insurance bill

Alberta’s provincial government has introduced Bill 47, the Automobile Insurance Act, a type of no-fault insurance that will largely eliminate litigation from the auto insurance system and provide a ‘care-first’ model designed to provide improved access to health and medical benefits.

The bill was introduced on Monday. If passed, Alberta’s privately delivered care-first system will begin on Jan. 1, 2027.

“We will consult with health care and insurance representatives on key operational elements of the care-first model,” the province’s finance ministry says of the proposed legislation. “Further regulations to implement the changes could be introduced in the fall of 2025.”

If passed, industry partners would implement the changes over the next two years, including developing 3.4 million new auto insurance policies.

The government says proposed changes would establish the benefits Alberta drivers may be entitled to if they are injured, under what conditions they could sue the at-fault driver, and how Albertans can appeal care and treatment decisions made by their insurer. The act is enabling legislation, which means that many substantive rules would be developed through future regulations, the provincial treasury board and finance ministry says.

Canadian Underwriter reported in November 2024 that the care-first system will allow catastrophically injured victims the right to sue, among other changes.

The government confirmed the legislation would restrict the ability to sue, except if an at-fault driver is convicted of a serious offence under the Criminal Code or Traffic Safety Act. Injured Albertans could also choose to sue for out-of-pocket expenses beyond the amount provided under their insurance policy.

“Alberta’s new care-first automobile insurance system would shift the focus away from court battles and costly litigation to providing care and support for everyone injured in a collision, so that they get the help they need when they need it,” the government says.

Devil in the details

Insurance Bureau of Canada (IBC) says in a statement it supports the government’s continued action on Alberta’s auto insurance system, but the devil will be in the details.

“Care-based auto insurance systems work by replacing costly legal battles with more efficient access to benefits and improved premiums, and the success of these reforms will be determined by the extent of litigation that the government permits,” says Aaron Sutherland, vice president of IBC’s Pacific and Western regions.

“The more lawyers are involved in Alberta’s care-first system, the less likely that drivers will save,” he says. “Other provinces and international jurisdictions have recognized this, and it is imperative that Alberta follow suit.”

If passed, the Automobile Insurance Act will, among other items:

• Direct insurers to pay compensation benefits regardless of who is at fault for the accident;
• Set out what insurers would need to pay or reimburse Albertans for reasonable and necessary medical, rehabilitation and other benefits. These would include prescribed health care services, equipment, medication and supplies, among other prescribed services. The legislation would apply as long as the services are needed to recover from injuries caused by the accident;
• Entitle Albertans who are unable to continue their employment, are denied Employment Insurance Act benefits, or are unable to complete their educational studies, an income replacement benefit;
• Entitle Albertans who sustain a permanent impairment because of an accident a permanent impairment benefit. The benefit would be subject to specific conditions. Insurers would need to determine the entitlement to administer this benefit;
• Establish that in the event of a death from an accident, the spouse or adult partner, or other dependents of the deceased, would be entitled to a death benefit. Funeral, interment and grief counselling services may be reimbursed;
• Outline how Albertans would make a benefits claim. Proposed legislation would establish the requirement that insurers must assist their clients, and would set out the independent medical examination process rules to make claims;
• Require insurers to pay compensation in accordance with the regulations. This includes how benefits would be paid, including annual indexation of benefit amounts and rules on the payment of benefits to minors and dependents;
• Establish the rules on how an insurer may recover costs if the claimant was not entitled to benefits, or where benefits were overpaid;
• Outline how the act would work with other programs, including the Workers Compensation Act;
• Require insurers to notify Albertans of decisions that would impact their benefits in writing. This would establish a process to require an internal review of that decision if requested by the claimant;
• Restrict, in most cases, the ability to sue an at-fault driver for injuries in an accident. Exceptions to litigation would include if the at-fault driver is convicted of certain driving offences under the Criminal Code or Traffic Safety Act (to be determined in regulations), or if losses exceed the amounts provided by the insurance policy, such as lost income;
• Establish the Alberta Automobile Care-first Tribunal through which Albertans can dispute care and treatment decisions made by their insurance company; and
• Include administrative elements, such as the delegation of the minister’s authority, the role of the Superintendent of Insurance and the ability of its office to set guidelines, develop forms and establish fees, among others.

Rate cap remains

Another significant change to Alberta auto reform that came into effect at the beginning of this year is the increase to the provincial rate cap from 3.7% to 5%. But the province is allowing an additional 2.5% rate rider on top of the 5% cap to account for natural disaster costs related to last year’s Jasper wildfire and Calgary hailstorm. This surcharge is in effect for 2025, but it’s not clear if it will be next year.

Sutherland says the legislation provides a framework for an improved auto insurance system in 2027, but further action is needed to fix challenges in the system today.

“For three years, the government has suppressed auto insurance rates below the cost of providing coverage,” Sutherland said. “This has forced several insurers to leave the province, and has caused frustration for drivers, who now have fewer companies to choose from and increasingly face challenges securing full coverage.

“While these reforms are a good step forward, today’s announcement alone will not bring insurers back to Alberta. To do that, the province must end its rate intervention, cut red tape and let the competitive market create the conditions for lasting affordability.”

Feature image by iStock.com/danijelala