Everything you need to know about Alberta’s new auto insurance system

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On Jan. 1, Alberta became the latest Canadian province to implement a “direct compensation for property damage” (or DCPD) auto insurance model, following in the footsteps of Ontario, Quebec, Nova Scotia, New Brunswick, Newfoundland and Labrador, and Prince Edward Island.  

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DCPD requires insurance providers to compensate drivers who end up in no-fault crashes, a change the Insurance Bureau of Canada (IBC) says could reduce premiums for 42 per cent of drivers in the province.   

What exactly does the change mean for drivers in Wild Rose Country? “For the majority of drivers, DCPD will either reduce their premiums or they will see no change at all,” the IBC says on its website.    

Here’s a quick look at what a DCPD model actually means for your rate — and whether you’ll be one of the lucky drivers who pays less every month for car insurance in Alberta.  

What is direct compensation for property damage (DCPD)? 

If you’re behind the wheel in a car crash that isn’t your fault, your insurance company will automatically cover any repair costs. It’ll then be responsible for arranging reimbursement from the insurance providers of any other drivers involved in the crash. “It’s really just a streamlining process for how a claim is handled moving forward,” said Jaime Tempeny, branch manager at Westland Insurance, in an interview with CTV News in December.   

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After a crash, DCPD covers basic property damage (e.g., a smashed-in fender or broken windshield), any contents inside the vehicle that are damaged, and loss of vehicle use.  

According to Alberta’s Automobile Insurance Rate Board , drivers in a DCPD model won’t pay out-of-pocket for these expenses if they are found to be 100 per cent not at fault for a crash. Perhaps most importantly for drivers, DCPD is mandatory for auto insurance policies in jurisdictions that implement it, so you’ll be covered no matter who insures you.   

Alberta’s previous insurance model could be particularly aggravating. Before Jan. 1, drivers who were considered not at fault for a crash were required to go after another driver’s insurance provider in court for compensation — an expensive and time-consuming process for anyone. (Although, as the IBC points out, drivers can still sue for injuries under a DCPD model.)

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Will Albertans’ auto insurance rates drop because of the DCPD model?

The answer really depends on how expensive your vehicle is. As the IBC explains on its website, DCPD is supposed to better align a driver’s insurance premium with repair costs.   

“This means that, typically, owners of less expensive vehicles that cost less to repair will pay less for their insurance,” according to the IBC. “Similarly, owners of more expensive vehicles that cost more to repair may pay more.”   

The IBC estimates that 42 per cent of drivers will see a rate reduction as a result of DCPD, while around 15 per cent will see no change to their premium. On the other end of the scale, about 34 per cent of drivers may see an increase in their premium of up to 5 per cent.

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What isn’t covered by direct compensation for property damage?

DCPD only covers drivers who aren’t at fault in a crash — drivers who want coverage in case of an at-fault crash will still need to buy collision insurance.    

Unfortunately, DCPD can’t help drivers who are the victims of hit-and-runs (your insurance company can’t bill a third party if their insurance provider can’t be found).  

Alberta’s new DCPD model may feel unfamiliar to drivers used to the process of billing a third party’s insurance provider directly, but the IBC says it’ll ultimately make the post-crash insurance process more straightforward.   

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