Alberta to cap auto insurance rates at 5% when ‘care-first’ system arrives in January 2027

Ahead of Alberta’s impending shift to a ‘care-first’ auto insurance system in 2027, the province has announced a new adjusted rate cap of five per cent.

Under the new cap, which will come in effect alongside the new system on Jan. 1, 2027, insurance companies won’t be able to raise average rates by more than five percent.

The government says all “average drivers” will see their premiums capped at a 10 per cent increase when they renew their policy. This replaces the Good Driver Rate Cap.

Under the previous Good Driver Rate Cap, even minor infractions excluded Albertans from qualifying for the 7.5 per cent cap protection. Drivers could lose rate protection under the current Good Driver Rate Cap if they switch their insurance company, move to a different community, or replace a vehicle.

The Ministry of Finance says the new system will provide “notable savings” to Alberta drivers.

“We will continue to closely monitor the system’s implementation to ensure good Albertan drivers benefit from lower insurance costs,” Minister Nate Horner said in a press release.

Horner’s office cited a report by Oliver Wyman which says auto insurance premiums will be lower on average once the new system is in place. The report claims drivers with basic insurance coverage can expect to say around $366 per vehicle, per year.

However, if the promised savings don’t materialize, the province says it will “take further action,” which could include making more changes to the rate cap and exploring other policies to ensure drivers see savings.

Care-First has been advertised as having faster access to care and recovery after collisions, rather than long, expensive fights in court.

“Alberta’s current auto insurance system relies heavily on litigation, driving up legal and administrative costs that are passed on to drivers,” the province says. “By reducing costs, the Care-First model is expected to lower premiums while improving stability for drivers. If an Albertan is injured in a crash, their first call should be to a doctor, not a lawyer.”

Increased accountability is also billed as a benefit of the new system, with the government saying the Automobile Insurance Rate Board will continue to monitor insurer rating programs and profitability to ensure premiums are still stable during the transition between systems.

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How does Care-First auto insurance work?

According to the province, the system is not ‘no-fault’ by definition.

Albertans will still be able to sue an at-fault driver convicted of Criminal Code driving-related offences, and certain crimes under the Traffic Safety Act, including impaired driving,

Injured Albertans will be able to sue an at-fault driver if they have to pay out of pocket over and avocer their insurance policy.

Drivers who are convicted of being at fault in an accident or are convicted under the Traffic Safety Act of a Criminal Code offence would see their rates go up.

The province saysa premiums will be determined by individual risk factors rather than market pressures, meaning good drivers will pay less and bad drivers will pay more.

Mixed reviews on policy change

The news of the Alberta policy changed has drawn mixed reviews.

The Insurance Bureau of Canada (IBC) has welcomed the change, agreeing that it will bring down legal costs and overall premiums for Albertans.

However, a legal advocacy group has warned the move to care-first removes an essential avenue for legal recourse and gives too much power to insurance companies.

Albertans pay among the highest premiums for auto insurance in Canada. IBC has previously said increasing legal costs make up one fifth of what drivers pay.

-With files from The Canadian Press