Alberta leads Canada in auto insurance lawsuit costs

Litigation trends for auto collisions straining affordability of insurance, with the provincial rate cap worsening the situation for Alberta’s drivers

Edmonton, AB (Oct. 15, 2024) – New data shows that the lawsuits and legal fees associated with insurance claims for auto collisions continue to soar in Alberta and are a key reason for the high cost of premiums. According to the latest information from the General Insurance Statistical Agency (GISA) – a statistical agency overseen by provincial insurance regulators – the cost of the average legal settlement related to auto insurance in Alberta exceeded $100,000 in 2023. This is a new record in Canada.

The size of auto insurance settlements in Alberta have surged 116% over the past 10 years, according to GISA data. As a result, Alberta drivers now pay over three times more in their insurance premiums for costs associated with legal fees and litigation following collisions than drivers in other Canadian provinces.

“We need to have an honest conversation about why premiums are increasing and what can be done about it,” said Aaron Sutherland, Vice-President, Pacific and Western, Insurance Bureau of Canada (IBC). “It’s critical that those injured in a collision receive the benefits they need to recover. But personal injury lawyers are increasingly using aggressive marketing tactics and advertising to encourage collision victims to make frivolous claims. These claims affect the cost of auto insurance for all Albertans.”

A recent report by professional services firm MNP^[1] confirmed the trends in lawsuits and legal fees, finding that between 2018 and 2022:

• The frequency of lawsuits following a collision increased 48%
• Over $1.2 billion was spent on costs associated with litigation following a collision
• When a claim is litigated, legal costs now vastly exceed – and are more than double – the amount provided in a cash payment for pain and suffering to those injured in a collision.

Legal and other cost pressures underlying auto insurance premiums have surged well above the current provincial rate cap, creating an untenable situation in the marketplace. With the cost of delivering auto insurance now well in excess of the price that insurers are able to charge in premiums, several insurers have been forced to withdraw from the province, while others have restricted the coverages they sell.

“There is no longer any debate. The Alberta government must move urgently to eliminate the rate cap and introduce changes to improve affordability for drivers,” said Sutherland. “Only meaningful action to address the cost pressures in the system, including legal costs, can achieve this. Alberta’s insurers are keen to work with the government to make meaningful action a reality.”

MNP released an additional report last week that found that the Alberta government’s auto insurance rate cap is negatively impacting drivers in the province.^[2] The report projected drivers’ premiums to increase by 87.6% over the next decade under the province’s auto insurance rate cap, if reforms are not introduced and current trends remain the same during this period.

Notes

1. MNP: System Costs and Auto Insurance Premiums (Sept. 2023).

2. MNP: Impacts of Rate Caps on Auto Insurance Rates in Alberta (Sept. 2024).

About Insurance Bureau of Canada

Established in 1964, Insurance Bureau of Canada (IBC) is the national industry association representing Canada’s private home, auto and business insurers. Its member companies make up the vast majority of Canada’s highly competitive property and casualty (P&C) insurance market. As the leading advocate for Canada’s private P&C insurers, IBC collaborates with governments, regulators and stakeholders to support a competitive environment for the P&C insurance industry to continue to help protect Canadians from the risks of today and tomorrow. IBC believes that Canadians value and deserve a responsive and resilient private P&C insurance industry that provides insurance solutions to both individuals and businesses.

For more information, visit www.ibc.ca. If you have a question about home, auto or business insurance, contact IBC’s Consumer Information Centre at 1-844-2ask-IBC.

Source: Insurance Bureau of Canada (IBC)

Tags: Alberta, Auto Claims, auto insurance, auto premiums, Legal Expense Insurance