Alberta to lift auto insurance rate cap, axe right to sue in crashes: Sources

The UCP government will announce this week it's going to let auto insurers raise premiums by substantially more than the 3.7 per cent rate cap it imposed this year — part of major insurance reforms that will promise customers savings in future years by removing personal injury lawsuits and legal claims from the system, CBC News has learned.

Premier Danielle Smith's cabinet has endorsed moving Alberta to a predominantly "no-fault" insurance system, according to multiple industry sources familiar with the government's deliberations and decisions. 

In a no-fault system, accident victims do not have the right to sue at-fault drivers; instead, their own insurers pay out injury benefits based on predetermined guidelines.

This would mark the biggest reform in decades of the way Alberta car insurance benefits work. But these changes — and the premium savings that theoretically come with them — would take roughly two years to implement.

In the shorter term, Alberta drivers will likely have to shell out more for what's already, by some measures, the priciest auto insurance in Canada.

Easing the current rate cap to allow insurers to charge more money is something the sector has lobbied for to address the rising costs of providing insurance. Those pressures have prompted some smaller insurance businesses to exit the Alberta market, and Finance Minister Nate Horner has previously expressed concerns that other companies will follow suit.

After ordering a rate freeze on auto insurance in 2023, the government allowed companies to raise premiums on good drivers by a maximum of 3.7 per cent this year — and while the province promised further reforms to improve affordability, Horner has said that 2024's rate increase limit "is not sustainable," and such caps or freezes could not continue indefinitely.

While CBC News could not confirm the more generous rate cap coming for 2025, two sources said they understand that cabinet this month discussed doubling the rate cap to permit 7.5 per cent increases.

Reached for comment, a spokesman for Horner confirmed the reforms are forthcoming after lengthy consultations, but would not discuss any details.

"Our focus is on reducing premium costs for Albertans and ensuring that they receive faster and better care following an accident," press secretary Justin Brattinga stated in an email.

Horner is scheduled to make the announcement on Thursday, according to sources.

The UCP government has made consumer affordability a top priority, from last year's $100-a-month direct payments to electricity reforms ushered in by Nathan Neudorf, named minister of affordability and utilities.

With the suite of auto insurance reforms that sources in both the legal and insurer sides of the system expect to come this week, the UCP will effectively be announcing pricier premiums at first, with potentially big reductions down the road.

The insurance sector may protest that even a higher rate cap won't be adequate to restore insurers' financial stability after years of rising costs for injuries, vehicle repairs and legal costs, as well as government-imposed price controls.