Legal costs impacting auto insurance premiums in Alberta – report

Legal costs impacting auto insurance premiums in Alberta – report | Insurance Business Canada

Insurance News

Legal costs impacting auto insurance premiums in Alberta – report

Fees associated with post-collision lawsuits add to other cost pressures

Insurance News

By
Mika Pangilinan

Fees associated with post-collision lawsuits have emerged as a significant contributor to rising auto insurance premiums in Alberta, according to a new report from consulting firm MNP.

MNP found that legal fees account for approximately 20% of premiums in Alberta, translating to nearly $200 annually for each driver.

Additionally, over $1.2 billion of the premiums paid by drivers went toward legal costs linked to insurance claims between 2018 and 2022.

Alberta’s auto insurance system has witnessed a 31% increase in legal costs since 2018, according to MNP.

The report noted that legal costs have exceeded the compensation received by claimants for pain and suffering, with around 38% of a settlement going toward legal fees and only 15% to the injured party.

Commenting on MNP’s findings, Aaron Sutherland, Pacific and Western vice president at the Insurance Bureau of Canada (IBC), highlighted the importance of allowing Alberta drivers to control their auto insurance and mitigate rising costs.

“Auto insurance premiums should help those injured recover following a collision, not line the pockets of personal injury lawyers,” said Sutherland.

Sutherland explained that the legal costs burdening Alberta’s auto insurance system could be addressed without switching to a no-fault model, pointing to a reform proposal put forward by IBC earlier this year.

This proposal can potentially reduce premiums by an average of $200 while doubling the amount of preapproved treatment and care for collision victims, according to IBC. The recommendations include allowing vehicle owners to waive compensation claims for minor injuries in exchange for lower premiums while preserving their right to sue for significant injuries.

“IBC’s Enhancing Care & Expanding Choice proposal puts consumers first by protecting the right to sue while also ensuring that those injured in collisions recover quicker and more fully,” said Sutherland.

What are your thoughts on this story? Feel free to comment below.