Legal Costs: A Significant Factor in Alberta’s High Car Insurance Rates

Legal Costs: A Significant Factor in Alberta’s High Car Insurance Rates

Legal Costs and Car Insurance Rates in Alberta

A recent study commissioned by the Insurance Bureau of Canada (IBC) has shed light on the significant role legal costs play in the high car insurance rates in Alberta. The study, conducted by consulting firm MNP, highlights that legal costs contribute to about 20% of the premiums drivers pay, representing an estimated total of $1.2 billion between 2018 and 2022. This issue is particularly prevalent in Alberta, where residents are four times more likely to file a lawsuit following an accident compared to other Canadians.

Is Going to Court Beneficial?

According to the IBC, seeking legal action after a collision may not always prove beneficial for those aiming for compensation. The legal fees often exceed the cash settlements for pain and suffering. As such, the IBC is advocating for more effective solutions that could stimulate competition and subsequently lower rates for drivers in Alberta.

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Government’s Response to High Insurance Rates

In response to the soaring insurance rates, the Alberta provincial government has decided to freeze insurance rates for most of 2023. Finance Minister Nate Horner is currently conducting a review of insurance rates, with a directive from Premier Danielle Smith to seek ways to make auto and home insurance more affordable for Albertans. However, the Minister has been resistant to adopting a no-fault insurance system, which would effectively eliminate the possibility for claimants to sue.

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Exploring Options: Current State and Future Prospects

The insurance rate freeze is due to expire on December 31, and Horner has stated that options are still being explored. Meanwhile, insurance companies have been requested to offer payment plans as an alternative to demanding full upfront payment of premiums.

Aaron Sutherland, IBC vice-president, concurs with Horner’s stance on no-fault insurance and proposes that more options should be available, allowing drivers to choose what best suits their budget. He suggests a move away from a one-size-fits-all policy, offering drivers more choice and control over their insurance. This could potentially lead to significant savings for Alberta’s drivers.

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