The Alberta government has introduced legislation to overhaul the province’s auto insurance system, replacing the current litigation-based model with a “care-focused” approach which it claims will reduce costs and speed access to benefits.

Bill 47, the Automobile Insurance Act, would apply to motor vehicle accidents (MVAs) occurring on or after January 1, 2027. The proposed changes establish a private insurance system that covers medical treatment, rehabilitation, income replacement and permanent impairment regardless of who caused the crash. Bill 47 was introduced March 24 by the Ministry of Treasury Board and Finance. If passed, it will take effect by proclamation. The act is enabling legislation, which means that many substantive rules would be developed through future regulations.

The right to sue will be sharply restricted, with legal action limited to cases involving serious driving offences or when injury-related costs exceed insurance coverage limits. Injured parties who have to pay out of pocket beyond the benefits provided by their policy will be able to sue the at-fault driver for those expenses.

“This legislation is about getting people the help they need—quickly and without unnecessary litigation,” Finance Minister Nate Horner said. The government expects the new model to lower insurance costs and stabilize premiums. Horner pointed to a 48% rise in MVA lawsuits between 2018 and 2022, with annual litigation costs exceeding $1.2 billion. Under the proposed system, Albertans injured in crashes would no longer need to sue to access compensation.

Horner rejected suggestions that this is a no-fault model. “No-fault is kind of a misleading term,” he said. “This is a fault – but care-based – system. Fault still matters.”

Medical and rehabilitation coverage – currently capped at $50,000 over two years – will now be unlimited for eligible expenses over a victim’s lifetime. Weekly income replacement will increase to 90% of net income, capped at a gross annual income of $120,000, payable to age 65.

A one-time permanent impairment benefit of up to $295,000 will be available for the most serious injuries. Other supports will include daily living assistance, home care, medical equipment, and income replacement for caregivers, students and minors.

All injured parties involved in MVAs, including those at fault, cyclists and pedestrians, will have access to medical and rehabilitation benefits.

Drivers could be denied benefits if they are convicted of serious offences or provide false or misleading information to their insurer. Horner said most injured Albertans would be eligible for care, but noted that certain benefits, such as permanent impairment payments, may not apply in egregious cases.

The bill gives the Superintendent of Insurance authority to set forms, fees and administrative rules. Final regulations are expected in fall 2025, following consultations with industry and healthcare stakeholders.

The bill also establishes the Alberta Automobile Care-First Tribunal to resolve disputes between insurers and claimants. Insurers would be required to assist with claims, issue written decisions, and continue payments during the review process. Details on the tribunal’s timelines and procedures have not yet been finalized.

The Insurance Bureau of Canada (IBC), which represents private insurers, welcomed the legislation but said the new system’s success will depend on how much litigation is allowed.

Proponents of the care-based model point to similar systems in Quebec and international jurisdictions where limiting legal costs helped stabilize premiums. But critics say that restricting legal recourse disadvantages victims with more complex claims.

Background

As we reported earlier, in 2020 Alberta released a report that looked at auto insurance across Canada and in other countries. The panel of three experts recommended a no-fault auto insurance system, like that in British Columbia, under which victims would be able to claim only from their own insurance company for property damage and treatment, and they would not be allowed to pursue any pain and suffering damages.

The province’s Direct Compensation for Property Damage (DCPD) system came into effect on January 1, 2022. Under the DCPD, a driver’s own insurer pays for repairs to their vehicle following a collision wherein the driver-policyholder is not at fault. The Insurance Bureau of Canada (IBC), representing the auto insurance companies, noted the new system should not be confused with a no-fault auto insurance system. And these changes applied to property damage, not personal injury claims.

In 2023, the Provincial Court of Alberta was renamed the “Alberta Court of Justice”. Unlike the Court of King’s Bench, this Court does not have deadlines for disclosing records and documents. This Court also lacks set procedures for questionings and expert reports; litigants’ only recourse is to apply for the Court’s approval to allow questioning or expert reports for their claim. The Provincial Court Act states the Court may apply the Alberta Rules of Court where the Act or applicable regulations do not provide for a specific practice or procedure.

Also in 2023, the Alberta Court of Justice civil claims limit increased to $100,000, doubling the existing $50,000 limit. As a result, the Court was expected to see increases in both the number and complexity of claims. The expedited procedures were thought attractive to both plaintiffs’ counsel and self-represented litigants to resolve their disputes quickly and cost-effectively. For higher risk personal injury claims like slip and fall, the relaxed rules of evidence were also expected to attract more litigants. The result: Alberta’s legal environment allows for more legal claims compared to other provinces, including higher payouts for pain and suffering and more lawsuits.

Claims under $100,000 pursued in the Court of King’s Bench may have a 25% decreased cost award since all claims with a monetary value below the Alberta Court of Justice jurisdiction will have cost applications assessed at no more than 75% of the lowest cost awards specified by the Rules of Court.

As of January 1, 2024, the minor injury cap in Alberta increased to $6,061. This is often called the whiplash cap, soft-tissue injury cap, injury cap, or minor injury cap. This number, released annually, indicates the maximum amount that can be claimed for non-pecuniary damages for minor injuries sustained in motor vehicle accidents. The adjusted amount accords with the annual change in the Alberta Consumer Price Index.

The Alberta government commissioned two reports on auto insurance, released in 2024.

  • Oliver Wyman Canada found a public auto insurance model would lead to the lowest premiums for Albertans. These findings have been contested by the insurance industry.
  • Nous Group estimated costs between $2.4 billion and $2.8 billion for the province to establish a new public insurance model: $100 million to $500 million to establish the insurer, and up to $2.3 billion in available capital reserves to pay out claims. It would also mean the loss of 3,200 to 3,900 private sector insurance jobs, at least of 750 broker jobs, and 700 to 850 legal services jobs.

The province also invited public input. An online survey was available from April to June, 2024.

In the midst of this, the insurance industry was blaming personal injury lawyers. IBC in 2024 launched a multi-media campaign, dubbed ‘LowerLegalFees,’ about the role that legal expenses and litigation fees play in auto insurance rates.

Premier Danielle Smith ruled out a public insurance system. “We like the ability to have a free enterprise market with a lot of players, but we’re still trying to navigate how we get to that,” she said. However, the rate cap Alberta imposed on auto insurance policies led several major insurers to pull out of Alberta, including Sonnet, Aviva’s S&Y subsidiary, and Zenith.

On balance, a no-fault regime with policies issued by private insurers appeared to be the most likely path. Also, an Opt-Out for minor injury lawsuits would allow drivers to choose lower premiums by waiving the right to sue for minor injuries, while retaining the right for serious injuries.

Enabling amendments to the Insurance Act were announced in the fall of 2024. Then come amendments to regulations, which are projected to be introduced in Spring 2025. Then, the government will implement over a period of 18 to 24 months. If the province meets its timelines, it would go live with its auto insurance reform in 2026 or 2027 — in time for the next provincial election.