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Lawsuit Highs and Lows: Legal costs impacting auto insurance premiums in Alberta

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

In its report, MNP found that legal fees accounted for approximately 20 percent of premiums in Alberta, translating to nearly $200 annually for each driver. Moreover, over $1.2 billion of the premiums paid by drivers went toward legal costs linked to insurance claims between 2018 to 2022.

MNP also noted that Alberta’s auto insurance system has witnessed a 31 percent increase in legal costs since 2018 and that these costs have exceeded the compensation received by claimants for pain and suffering with approximately 38 percent of a settlement going toward legal fees and only 15 percent 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 pre-approved 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.

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