What direct compensation for property damage auto insurance means for Alberta drivers

Alberta is changing how insurers pay out damages in motor vehicle collisions through changes to mandatory coverage set to go into effect in 2022.

Claims process, premium calculations will change in new year

Direct compensation for property damage will be part of mandatory auto insurance in Alberta. (Monty Kruger/CBC)

Changes to how insurers pay out damages in motor vehicle collisions are set to go into effect in Alberta in 2022.

Amendments to the insurance act passed last year, introduces direct compensation for property damage or DCPD.

Starting Jan. 1, drivers not at fault in a collision will deal with their own insurance provider rather than going through the at-fault driver's provider.

The new system is the standard across Canada, said Aaron Sutherland, vice-president western with the Insurance Bureau of Canada.

"We are playing a little bit of catch up here in Alberta, but it is a more efficient system," he said. "And because of that the rest of the country has adopted it as well."

DCPD covers vehicle damage, loss of use, and any contents that are damaged.

It does not prevent legal action for injuries.

DCPD does not cover damage from an unidentified or uninsured vehicle.

What difference will it make to drivers?

Sutherland said the previous coverage style — where different insurers would need to work together to allocate costs — could take longer and cost more.

DCPD will make things simpler for consumers, he said.

"It allows your own insurance company to repair your vehicle — that's done much more quickly, much more efficiently."

Kassandra Kitz, a spokesperson for Alberta's Treasury Board and Finance, said DCPD is a more efficient way to process claims.

"For Alberta drivers, this means they can expect a more consistent treatment and quicker response on claims from insurers."

What if a driver is at fault?

For at-fault drivers, the process remains the same. The driver goes through additional collision coverage or pays out of pocket. If the drivers are considered partially at-fault, the claim will be split.

A notice from the superintendent of insurance dated Oct. 18 points to fault determination rules in the DCPD regulation that cover more than 40 collision scenarios. 

At-fault drivers will still be held accountable as the collision is added to their driving record, the notice says.

How will it impact premiums?

Premiums are expected to change because insurance companies will now be paying for the cost of repairs directly to their customers.

Under current coverage, an insurer calculates premiums partially based on the chance of hitting a luxury car and needing to pay the repairs.

"So you're actually paying more to subsidize the premiums of luxury car owners," Sutherland said.

Under DCPD, drivers will pay premiums based on the value of their own vehicle. That means if a driver has a less expensive vehicle that costs less to repair, they would pay less, Sutherland said.

"It's a fair system," he said. "It does mean we will see some premium changes over the next 12 months."

IBC estimates 73 per cent of drivers will see no change in their premiums or only a small difference — up to five per cent more than they are paying now, or up to five per cent less.

Another 18 per cent of drivers will see savings greater than five per cent. Nine per cent of drivers will see their premiums increase by five per cent or more.