Economica

Care First: A Promise not Realised

Christopher Bruce
Professor Emeritus of Economics
University of Calgary
August 2026

Executive Summary

This paper compares Alberta’s no fault Care First auto insurance model with the existing tort-based framework. The central claim of the paper is straightforward: the government’s assertion that Care First will increase compensation to injured parties while reducing premiums is not supported by the statistical evidence. Using publicly available data and a set of transparent simplifying assumptions, the paper argues that, unless compensation is reduced, Care First is unlikely to reduce premiums.

The paper then follows this argument by showing that Care First does reduce compensation significantly, but not for all drivers: rather it discriminates against (i) individuals who would have received increased incomes due to what I will call career progress (ii) individuals who are injured before they have finished their schooling; (iii) individuals who earn more than $125,000; and (iv) individuals who have been catastrophically injured.

That the rules under Care First are inequitable in these ways leaves open the question of whether the Alberta Automobile Care-first Tribunal will be permitted to rectify these inequities.

Intruduction

In October 20201, Alberta ‘s UCP government announced its intention to replace the province’s tort-based automobile insurance regime with a no fault model that it called Care First2. The government has claimed that this reform will both increase compensation for accident victims and reduce premiums. In February 2026, it released actuarial calculations prepared by consulting firm Oliver Wyman3 in support of that position.

This paper offers an alternative assessment, based on publicly available data. It shows that the core claim of Care First is unlikely to hold: on reasonable assumptions, a system that increases compensation to all at-fault drivers while holding constant the compensation to not-at-fault claimants will raise both the total costs of accident claims and the premiums required to pay for those claims. To meet the government’s goal, of reducing automobile insurance premiums, the compensation paid to at least a large subset of injured drivers will have to be reduced substantially.

The argument proceeds in three parts. The first compares the operation of the existing tort-based automobile insurance system with Care First. In the second, simplified models of these two systems are developed to show that, under most circumstances, the tort-based system will be less costly than Care First, thereby resulting in lower premiums in the former than the latter. In the third, it is shown that one way that Care First proposes to reverse this inequality – that is, to reduce premiums in Care First below those charged under the existing tort-based system – is to reduce the compensation available to one set of drivers – those under 30 – substantially.

I. Differences Between Tort-based Insurance and Care First

1. Tort Based

Tort law is the set of common law rules that allow citizens who have suffered injury at the hand of another’s negligence to sue the injurer for damages. The parties launching such suits only succeed if they can show that they were not at fault for their injuries and that the defendants were at fault. Only successful claimants receive compensation for their damages, to be paid by the at-fault party (or its insurers). Those damages are intended to provide the claimant with full compensation for his or her injuries – that is, to restore that party to the position occupied before the loss.

2. Care First

Care First differs from a tort-based system in two important ways. First, it is a no-fault system: all injured parties, whether at fault or not, are eligible for compensation from their own insurers.

Second, damages are no longer assessed according to the common law. Instead, rules are imposed by statutory law – that is, by government decree – and protagonists are not allowed to appeal the compensation they receive under those rules to the courts. Such appeals must go through an internal body – in the case of Care First, the Alberta Automobile Care-first Tribunal4. Although this Tribunal may be able to award damages similar to those that could have been obtained under a tort-based system, there is reason to believe that it will not be allowed to do so.

Thus, Care First was designed to reduce the parties’ expenditures on litigation. At the same time, however, it will substantially increase the total number of claimants who are eligible for compensation. Thus, if the latter exceeds the reduction in litigation costs, total costs of insurance will rise, as will premiums.

II. Basic Models of Tort and No fault Insurance

In this section, two simplified models of expected claims costs are developed:5 first under the existing tort system and then under Care First. These models suggest that no fault systems like Care first will produce either a substantial increase in insurance premiums or a substantial decrease in the compensation available to not-at-fault drivers (or both).

1. Costing tort-based insurance

In the tort system currently in place in Alberta, parties who are not at fault receive compensation for personal injuries from two categories of insurance: bodily injury damages, which are paid by the at-fault driver’s insurance company, and accident benefits, which are paid by the driver’s own insurer. Recently, bodily injury claims have averaged approximately $80,000,6 while accident benefits have averaged approximately $10,000. Hence, the average compensation for personal injuries received by not-at-fault claimants has been approximately $90,000.

At-fault drivers are not eligible to receive compensation for bodily injury damages, but they do receive accident benefits – again, $10,000 – from their own insurers.

Thus, as the number of at-fault drivers is approximately equal to the number of not-at-fault drivers,7 the average level of compensation paid under the current system is $50,000 (= 0.5 x $90,000 + 0.5 x $10,000).

Finally, as the annual the probability that any driver will be involved in a compensable accident is approximately 11 in 1,0008, the average cost to insurers of bodily injury damages plus accident benefits, per driver, is $550 (= 0.011 x $50,000). It is this number that will form a major component of drivers’ premiums.

2. Costing Care First

As Care First is a no fault system, all injured parties will receive compensation for their personal injuries regardless of their level of fault. This has two effects on costs. First, parties who are negligent, and therefore would have been denied bodily injury damages under tort, will now be able to claim the same level of compensation that is paid to non-negligent parties. Second, those litigation costs that would have been devoted to the determination of negligence in a tort system will now be avoided (or reduced significantly).

As the number of negligent parties is approximately equal to the number who are not negligent, allowing negligent parties to claim the same compensation as non-negligent will double the number who can claim full damages, increasing costs significantly.

This increase can be offset to some extent by a reduction in the compensation to claimants by an amount equal to the litigation costs that would otherwise have been devoted to the determination of negligence. In Alberta’s current tort-based system, the total cost of litigation has been estimated to equal about 25 percent of the damages that are received by not-at-fault parties9. This implies that claimants only benefit from 75 percent of any compensation that is awarded to them. In short, out of the $90,000 average, not-at-fault drivers in the current tort system have been receiving a net benefit of $67,500, (and legal costs have amounted to $22,500).

If Care First drives legal costs to zero10, non-negligent parties could be made as well off as they were in tort if their compensation was set at $67,500. If this is done, and negligent parties are paid the same compensation as non-negligent, the average premium under Care First, all else being equal, will be (0.011 x $67,500), or $742 – 35 percent higher than under tort.

In short, even though Care First pays not-at-fault drivers significantly less than had the tort system ($67,500 instead of $90,000), that saving is more than offset by the increase in compensation insurers will now be required to pay to at-fault drivers ($67,500 instead of $10,000). Premiums will have to be increased unless compensation to not-at-fault drivers is reduced.

III. The Sources of Reduced Compensation

As the government’s primary motivation for introducing Care First is that it wishes to reduce automobile insurance premiums, it must be assumed that compensation to not-at-fault drivers will have to be reduced. Four sources of such reductions are set out in Bill 47, the Automobile Insurance Act and an Appendix to that Act called Income Replacement and Monetary Benefits Regulation11.

1. Career progress

Under Care First the injured party’s compensation for lost earnings will be based on the average of their earnings in the two years preceding their injury. Hence, for example, if that party had earned an average of $70,000 per year, and their accident left them unable to earn any market-related income, Care First will pay them $70,000 per year (adjusted for inflation) until the projected age of their retirement.

These payments will dramatically undercompensate them for their loss if, as is the case for most people, they worked in a profession or occupation in which individuals could expect to receive annual increases in their incomes due to career progress – that is, increases that would have occurred because individuals gain experience, benefit from on-the-job training, and receive merit-based promotions. Typically, an individual who earned $70,000 per year at age 25 could expect career progress to result in an increase of 33 to 50 percent by their age 35 or 40 (and for their incomes to more or less level out after that age).

Assume, for example that an individual who earned $70,000 at age 25 would have earned $100,000 by age 35 (at which point their earnings would have levelled off until age 65). Even if that driver was completely disabled, and therefore began to lose $100,000 per year by age 35, Care First will pay only $70,000 per year. In the 30 years between 35 and 65, that individual will be undercompensated by $900,000. (In addition to $150,000 in the years from 25 to 35.)

Compare this with the compensation paid to an individual in the same occupation as the one just described, but who is injured at age 35. At that age, the injured party would have progressed to an income of $100,000 and will be compensated for the loss of that income until age 65. The injured 35 year-old will be fully compensated for his or her less, whereas the “same” individual will be undercompensated by more than $1 million.

Furthermore, a further inequity will arise if the individual described above is able to earn a reduced income after the accident. This income will be deducted from the individual’s compensation. But notice, if that compensation increases due to career progress in the individual’s post-accident employment, the differential between the $70,000 on which compensation is to be based and the income which is actually earned will decrease over time. This decrease arises strictly because career progress is not considered when determining potential pre-accident earnings (the $70,000 figure) but is included when determining actual post-accident earnings.

2. Incomplete schooling

Income replacement benefits under Care First are also inadequate in the case of individuals who were injured before completion of post-secondary education – such as a bachelor’s degree or journeyman’s certificate – and whose injuries have prevented them from earning the income they would have received had they completed their schooling.

In such cases, Care First assumes that students who had been enrolled in post-secondary programs would have earned an amount equal to average Alberta weekly earnings, multiplied by 52, and then by a further 1.15 after two years. Thus, as the current average weekly earnings are approximately $1,400, the maximum compensation payable to these individuals will be approximately $83,000.

Census data, however, indicate that in 2020, average income for those 25-64 (males plus females) with a bachelor’s degree was $102,50012; and for those 25-64 with a journeyman’s certificate was $93,600. Converting those figures to 2025 levels, using the percentage increase in Alberta average weekly earnings (15.6 percent), yields figures of $118,500 and $108,200, respectively. Both clearly exceed the compensation provided by Care First – by 40 percent in the case of a bachelor’s degree and by 30 percent in the case of a journeyman’s certificate.

Those whose education is interrupted before completion of high school, on the other hand, will receive compensation that is consistent with the income that they would have earned had they completed that education.

IV. Implications

A common theme in Section III was that a large portion of the savings in costs that have been promised by proponents of Care First has common from significant reductions in compensation to small groups of injured parties, reductions that were not shared by the population as a whole. This inequity could be resolved in a number of ways.

1. Revise the rules set out in the Benefits Regulation

It was shown in Section III that the proposed rules for setting compensation under Care First – identified in the government document Income Replacement Benefits Regulation13 – discriminates against young drivers by denying them compensation for the growth in incomes that would normally come from career progress. But this Regulation is headed by the disclaimer:

The Government of Alberta has prepared and shared this draft regulation for informational purposes only. This draft regulation is not law, and the content of this draft regulation is subject to change. The Government of Alberta makes no representations or warranties about, and shall not be liable for, the accuracy or completeness of the information in this draft regulation.

In short, the rules as discussed in Section III have not yet been given official recognition. It may be worthwhile, therefore, to approach the government with concerns about those rules set out in the Regulation that can be shown to be inequitable – specifically the rules (or lack of same) that omit reference to career progress.

2. Allow the Tribunal to revise inequitable rules

In an email message of May 13, 2026, Darren Hedley, Deputy Minister Treasury Board and Finance, wrote to Karamveer Lalh, of Alberta Trial Lawyers Association:

Regulations regarding the Tribunal are currently under development. Our goal is to design and implement a Tribunal that will be effective, efficient, and responsive to the needs of both claimants and the insurers supporting those claimants. We would welcome any input that you, the ACTLA, or the CBA would have, as soon as possible… (italics added)

In this light, I would suggest that the government be pressed to allow the Tribunal to make alterations or modifications to those rules in the Regulation that can be shown to be inequitable – e.g. that allow career progress to some victims but not others.

Encourage drivers to purchase additional optional coverage

In cases in which it is known that Care First will provide inadequate coverage, such as when it limits compensation for loss of income to a maximum of $125,000, insurers could be required to offer drivers additional, optional coverage – such as SEF 20s: “Additional coverage if the driver’s income exceeds standard replacement limits.” As many of the individuals who would require such coverage will be young and inexperienced – such as students who have not yet completed their degrees or individuals who have just begun a career in which career progress is possible – insurers should be liable for any failure to make clear that such options are available.

  1. “Alberta government tables auto insurance bill, committee recommends adopting no-fault insurance,” CTV News, October 29, 2020;
    https://www.ctvnews.ca/calgary/article/alberta-government-tables-auto-insurance-bill-committee-recommends-adopting-no-fault-insurance/#:~:text=No%2Dfault%20insurance%20is%20when,accountable%20through%20the%20court%20system.” ↩︎
  2. Bill 47, the Automobile Insurance Act, March 2025 https://docs.assembly.ab.ca/LADDAR_files/docs/bills/bill/legislature_31/session_1/20230530_bill-047.pdf. Note, however, that the Deputy Minister of Finance, Mr. Darren Hedley, has stated that Care First is not a no-fault regime – it is our interpretation that that is how Care First will operate. ↩︎
  3. Oliver Wyman, Care First: Actuarial Costing: Preliminary Report, Automobile Insurance Rate Board, Edmonton, February 4, 2026. https://albertaairb.ca/wp-content/uploads/2026/02/Care-First-Reform-Costing-PRELIMINARY-2026-02-04-Secured.pdf ↩︎
  4. See The Legislative Assembly of Alberta, Bill 47: Automobile Insurance Act, Part 4, Tribunal and Appeals, May 15, 2025. https://www.assembly.ab.ca/assembly-business/bills/bill?billinfoid=12072&from=bills ↩︎
  5. Bodily injury damage: physical damage to a person’s body, including injuries, illness, or death. Accident benefits: mandatory, no-fault coverage that provides compensation for medical expenses, income replacement, and funeral costs to insured individuals injured in a car accident. ↩︎
  6. In Feasibility Study of Long term Auto Insurance Reforms, consulting firm Oliver Wyman (April 2024), found that “…the average 2022 claim severity for …. bodily injury was …. $80,770.” (p. 24). https://open.alberta.ca/dataset/6a9575f8-eed8-4773-8f2e-93325ba68a04/resource/f75ae36c-1721-4b64-af69-b882750b73d6/download/tbf-auto-insurance-changes-in-alberta-2024.pdf ↩︎
  7. Oliver Wyman (op. cit. footnote 3) reports that for not-at-fault drivers the claims frequency is 4.745 claims per 1,000 vehicles. For the combined at-fault and not-at-fault the frequency is 10.864 claims per 1,000 vehicles. ↩︎
  8. Ibid. ↩︎
  9. MNP, System Costs and Auto Insurance Premiums: Final Report, (Prepared for the Insurance Bureau of Canada), September 2023 (Table 7, p. 29). https://betterautoalberta.ca/wp-content/uploads/2025/04/IBC-System-Cost-Report-September-2023.pdf ↩︎
  10. This is unlikely as a considerable portion of litigation costs are devoted to determining the level of damages to be paid to accident victims. At least some portion of those costs will be retained under Care First. ↩︎
  11. https://open.alberta.ca/dataset/102e4839-6f2d-4ba4-999f-a93306d6666d/resource/ad6ca13e-c79f-4bd1-bdef-1e15b24c8609/download/tbf-income-replacement-and-monetary-benefits-regulation-draft.pdf ↩︎
  12. https://www150.statcan.gc.ca/t1/tbl1/en/tv.action?pid=9810041001&pickMembers%5B0%5D=1.121&pickMembers%5B1%5D=2.1&pickMembers%5B2%5D=3.6&pickMembers%5B3%5D=4.12&pickMembers%5B4%5D=5.5&pickMembers%5B5%5D=6.1 ↩︎
  13. Appendix to Bill 47, Automobile Insurance Act ↩︎

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