A new actuarial report released by the Automobile Insurance Rate Board projects lower premiums under Alberta’s proposed care-first auto insurance system, while the analysis also shows those savings are offset by cost increases in other areas and depend on changes to how claims are handled.
The report, prepared by Oliver Wyman Limited for the rate board, models expected premiums under a system that would replace court-based injury compensation, with litigation limited to specific circumstances.
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Projected direct premium savings for basic coverage reach $366.10 per vehicle annually, while total realized savings are estimated at approximately $258.87 on average once other cost changes are included.
The report states part of the financial change reflects the elimination of “rate inadequacies,” which “does not represent a direct cost savings to Albertans.”
The Government of Alberta states the report shows moving away from a court-based insurance system will reduce overall costs and improve stability for consumers.
Savings tied to injury costs, legal expenses and pricing adjustments
The actuarial analysis identifies reductions in injury-related claim costs and adjustments to insurer pricing as key drivers of financial change.
Savings are concentrated in injury coverages, while costs for physical damage coverages are expected to increase.
An exhibit in the report estimates legal costs — including lawyer fees and expert reports — accounted for approximately 32.9 per cent of total claim costs in one analysis.
The Government of Alberta states settlements can see 30 to 40 per cent paid to lawyers.
The report includes legal costs as a component of claim costs and models reduced costs under the care-first system.
Pricing pressure and system imbalance
The report states the continuation of rate inadequacies “was an untenable situation for insurers in Alberta.”
Separate modelling shows a gap between required premiums of about $2,454 and an average premium of about $2,001.
It estimates direct premiums for injury coverages at approximately $500.
Shift from court-based compensation to defined benefits
Under the proposed system, injury claims would be resolved through defined benefits rather than court-awarded damages, with litigation limited to specific circumstances.
The Government of Alberta states pain and suffering damages are replaced by immediate benefits.
Benefits include income replacement of up to $125,000 per year, permanent impairment payments approaching $295,000 and treatment tied to recovery needs.
The system provides unlimited medical coverage for life.
Treatment and benefits can begin within weeks, with no lengthy court delays.
Out-of-pocket expenses can be automatically claimed.
The Government of Alberta states savings from reduced legal costs can be redirected to pay for increased benefits and to support long-term affordability and stability.
Direct contrast with current system
The Government of Alberta outlines differences between the current and proposed systems.
Under the current system:
- Medical and rehabilitation benefits are capped at $50,000, with income replacement of about $600 per week for two years.
- Pain and suffering damages may be pursued through court processes.
- Legal claims can take months or years to resolve.
Under the care-first system:
- Treatment is not capped if it supports recovery.
- Compensation is delivered through defined benefits without litigation.
In fatal cases, current payouts can be as little as $10,000, sometimes just $4,000 per survivor, while under the new system a spouse could receive up to $600,000.
Right to sue restricted
The Government of Alberta states lawsuits would be limited to cases where an at-fault driver is convicted of certain serious offences, including dangerous driving or impaired operation.
Under the current system, not-at-fault drivers can sue in most circumstances.
Context: rising costs driving reform
The Government of Alberta states rising premiums are being driven by legal costs, inflation, vehicle theft, weather-related losses and tariffs.
A separate Automobile Insurance Rate Board report — the 2026 mid-year Market and Trends report — shows auto insurance premiums in Alberta reached $1,835 in the first half of 2025, an 8.2 per cent increase from a year earlier.
The report states, “Auto insurance affordability remains a central concern for Alberta drivers.”
The same report shows bodily injury claim severity rose from $83,000 in early 2020 to $146,121 in the first half of 2025.
It also states insurers reported a return on premium of -20.0 per cent in 2024 and describes the market as operating in a period of “heightened uncertainty.”
The Government of Alberta states premiums under the care-first system would be determined by individual risk factors.
The Government of Alberta states the Good Driver Rate Cap protects some drivers from significant increases, and that without it average premiums could have exceeded $3,100 by Jan. 1, 2027, while premiums are expected to be around $2,000 when care-first is implemented.
Model based on projections
The actuarial report states projected premiums are based on modeled assumptions about claim costs, inflation and system changes.
It states claim costs are expected to increase due to inflation between 2025 and 2027 and that rate adjustments alone would not address existing pricing gaps.
What changes for drivers
Under the proposed system:
- Compensation shifts from court-awarded damages to defined benefits
- Pain-and-suffering damages are replaced by benefits
- Access to lawsuits is restricted
- Treatment and income supports are expanded and delivered earlier
Projected premium reductions are tied to lower injury-related costs and reduced legal expenses, with cost increases in other areas.
Transition timeline
The Government of Alberta states the care-first auto insurance system is expected to take effect Jan. 1, 2027.
The Automobile Insurance Rate Board is an independent agency established under the Insurance Act to regulate auto insurance company rating programs.
Based in New York, Stephen Freeman is a Senior Editor at Trending Insurance News. Previously he has worked for Forbes and The Huffington Post. Steven is a graduate of Risk Management at the University of New York.