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Premier Says NO to No-Fault Insurance

June 6, 2024 From CTV News

In a recent report commissioned by the Alberta Treasury and Finance Board, it was suggested that a switch to a government-run auto insurance system could save drivers in the province hundreds of dollars annually. The report by Oliver Wyman and Nous Group indicates that adopting a no-fault insurance system, similar to those in Manitoba and Saskatchewan, could lead to significant cost reductions for Albertans.


The key difference between Alberta’s current tort system and the no-fault models is in how claims are handled. In no-fault systems, each individual’s insurance is responsible for their compensation after an accident, eliminating the need for litigation. This switch could potentially save Albertans around $730 annually on premiums, translating to a total of $2.1 billion in consumer savings across the province.


Despite these potential savings, Premier Danielle Smith has stated that a government-run public auto insurance model is not a feasible option for Alberta due to the high initial costs and long-term financial implications. The start-up costs alone are estimated to be between $100 million and $500 million, with an additional $2.3 billion needed in capital reserves to cover claims. Such a move would reduce provincial tax revenue by approximately $163 million to $171 million annually.


“The sticker shock of bringing through a fully publicly-funded auto insurance program in Alberta made all the ministers’ eyes pop,” said Premier Smith. She also noted that the appetite for a fully Alberta-run public insurance system is very low.


As of now, a government survey on this issue has received 12,000 responses and remains open until June 26. The province is exploring various changes to the insurance system, including an option for drivers to opt into a no-fault system at a lower cost. This hybrid approach could help manage costs while maintaining the ability to hold others accountable through the legal process in severe accidents.


Aaron Sutherland, vice president of the Insurance Bureau of Canada (IBC), highlighted that legal costs are a significant factor in Alberta’s high insurance premiums. “Those costs are three times higher than other provinces in Canada,” Sutherland said, noting that a hybrid system could handle minor claims outside the courtroom, saving drivers several hundred dollars annually.


The IBC also recommends reforming the current tort model by cutting the province’s four-percent insurance premiums tax and removing the cap on premiums for high-risk drivers. These changes could save safe drivers around $180 million a year, although they wouldn’t lower prices as much as a new public model.


With the next election on the horizon, there is pressure on the government to act swiftly to improve affordability. Sutherland emphasized the urgency, stating, “We’ve got to get going if we want to see this in the near future.”




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