When the government touts that its auto insurance reforms might curb premiums by $400 come 2027, the ministers and premier don’t readily mention what’s to come in the three years leading up to that.

For this year and the next two, Alberta is permitting annual rate increases of 3.7 per cent, 7.5 and 7.5 per cent, respectively. That amounts to about $325 more for the average driver.

Steps forward, steps back.

Except there are no guarantees the $400 savings will come at the end of this overhaul; that will depend on as many economic factors as actuaries can calculate.

Even if Alberta heavily regulates auto insurance, it can make no guarantees of what costs the free-market businesses will need to cover in a few years’ time. 

“We regulate this industry, but it isn’t magic,” Finance Minister Nate Horner said. 

Freeze, then burn

The Smith government froze rates in 2023 — a provincial election year, like 2027 will be. Its 3.7 per cent rate cap this year didn’t do enough to ensure the sector remained profitable after recent hail storms and other rising costs, so Horner said he’d let companies charge much more over the next few years, even if the industry had asked for no rate cap at all.

“We’re stemming the bleeding of the insurance companies so they can provide this, because we wouldn’t be able to build [a new system] in time, even if we wanted to,” he told reporters this week.

Alberta’s reforms to the current private system are expected to induce bleeding in another sector — the personal injury lawyer realm, which will be decimated under the planned system in which accident claim lawsuits are all but eliminated. A government-commissioned report has forecast 650 to 800 job losses in the legal sector (lawyers, paralegals and other support workers), as well as up to 1,000 jobs in other areas.

“The reality is this one’s an industry killer,” said Mark McCourt, a veteran injury lawyer. He quipped that he’ll have to find “honest work” in a couple years, barring some major concessions or a full policy U-turn by Premier Danielle Smith.

He fought bitterly against the last major Alberta system reforms, two decades ago when Ralph Klein’s Tory government imposed a new premium grid and set maximum payouts for minor injuries like whiplash.

McCourt credits a then-younger Calgary Herald columnist in 2003 for persuading Tory MLAs to soften their reforms. Her byline was Danielle Smith.

She’d written that a plan for compensation limits on a wider set of injuries “stinks,” and that in a proper Alberta insurance reform, “preserving the rights and interests of victims must be the starting point.”

In 2024, that same Danielle Smith has pledged to remove the right of victims to sue except in cases where the at-fault driver is convicted of a major offence, like impaired driving — a conviction that would occur long after a crash victim begins needing support.

“Politicians sometimes change their minds,” McCourt said. “She was right one of those two times, but it wasn’t yesterday.”

Jim Rivait was also a veteran of the Insurance Reform Wars of ’03-’04. He was western vice-president of the Insurance Bureau of Canada at the time, and recalls how nasty the feuding would get. (McCourt himself wound up apologizing and stepping back from a prominent lobby group after he admitted he’d overstepped by taking aim at Tory MLAs’ “rank incompetence” on the insurance file.)

To Rivait, it was worth the fight. 

Thanks in part to curbs on claim payouts, then-overheated insurance rates went down by around 18 per cent — including a government-mandated, five per cent cut in 2004 (another provincial election year). But insurance rate relief isn’t ever-lasting.

“Over time, benefits of the reforms you make get eroded, and people find ways around the rules,” Rivait said. Now that that’s happened, going to a no-fault system is the “next logical step,” he added.

The other three western provinces all have no-fault claims systems, with insurer-provided benefits replacing the right to sue. B.C. only adopted it in 2021, in hopes that rates would go down, and amid warnings of massive job losses for legal support staff.

And lo, the insurance industry’s costs dropped after no-fault came in, and the provincial monopoly insurer has frozen rates since then, as premiums in other provinces like Alberta vaulted higher.

Policy road trip

Meanwhile, John Rustad, Smith’s conservative leader counterpart in B.C., ran and nearly won this fall’s election campaign with a pledge to alter no-fault insurance to let more victims sue for just compensation, and also allow private insurers like in Alberta.

Smith’s going in the other direction, at least on no-fault, because that’s what government reports told her could save consumers money. Those same reports, however, also stated that Alberta drivers would save even more money under a public insurance regime like in B.C., Saskatchewan and Manitoba.

But that’s not where Horner and Smith want to go. They chafe at the reported startup costs of nearly $3 billion, though the report also suggests annual consumer savings that total more than $2 billion. 

How does Alberta’s current insurance system compare to other provinces

On average, Albertans pay the second-most expensive auto insurance in Canada, behind Ontario. The province will move to a new system in 2027 with the intention to make it more affordable, eventually. CBC’s Travis McEwan looks at how Alberta’s current system compares to the rest of Canada.

The NDP leader has said mixing private insurance and no-fault is a terrible idea, and the province should explore a public model. But even if these United Conservatives can’t stomach it now, they are holding it out there as a threat to the private insurers.

“We have been given the assurance that this will bring the rates down and deliver better care,” Smith said at a news conference. “And if not, you know, there is that one last step of a public insurer if it doesn’t end up working out.”

Going public would take profit provisions and most broker commissions out of the mix of factors that go into setting auto insurance premiums.

It would also wipe out several thousand private-sector jobs, replacing them with employees of an Alberta version of a Crown corporation, like Saskatchewan Government Insurance or the Insurance Corporation of British Columbia.

Maybe that becomes a post-2027 proposition, under an NDP government or a currently reluctant Premier Smith. But for now, hope for lower premiums rests on the reduced total costs of benefits and litigation, with the impact of those changes felt by the likes of McCourt.

But the changes wouldn’t end there, the lawyer predicts.

If the province goes forth with this plan and things get as messy as he expects for ratepayers and victims alike, McCourt said, there will be “mutually assured destruction for personal injury lawyers, the UCP government and the Alberta auto insurance industry, in that order.”