Canadian Underwriter

Are car rental shortages affecting loss of use endorsements?

August 5, 2022   by Alyssa DiSabatino

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The car rental shortage isn’t only impeding on Canadians’ travel plans—it could also affect policyholders’ loss of use endorsements. Luckily, there are alternative options for insurers to reimburse customers on their loss of use policies, says one of Canada’s largest auto insurers.

“We’ve seen the duration of rentals increase significantly in 2022,” says an Aviva Canada spokesperson in an email statement. “We are seeing the average length of rental increase by six days mainly driven by parts availability delays on undrivable vehicles.”

The car part shortage and repair backlogs have seen the length of rental (LOR) for collision-related rentals in Canada jump nearly six days year-over-year, said a recent report from Enterprise Rent-A-Car.

Rental fleets dropped by almost one-third in 2020 in British Columbia and reached its lowest level in a decade by the end of the first year of the pandemic, according to Statistics Canada.

Loss of use endorsement policies offer policyholders reimbursement in the form of a rental vehicle, if their own vehicle is not driveable due to an insurable loss.

Rental car prices have increased nationally due to the shortage. Availability issues fuelled a 31.9% price increase in 2021, even when tourism levels were nowhere near the pre-pandemic peak, according to StatsCan.

Despite this, most customers have not been exceeding their coverage, Aviva says. “For not at fault loss where the rental limit is not applicable, we will help mitigate by negotiating rates for customers. Based on our data, only 2% of Aviva Canada customers exceed their rental coverage.

“From a claims processing perspective, we pay up to the limit, however we waive the rental limit when it’s a not at fault [direct compensation – property damage] DCPD loss,” says Aviva. “To help our customers mitigate cost, we try to provide them with a rental through our contracted suppliers and negotiating rental rates when we don’t have a contract in place.”

Fortunately, rental cars aren’t the only option for customers with loss of use policies, which often reimburse alternate forms of transportation, like rideshares, taxis or public transportation.

“Customers with loss of use endorsement continue to be entitled to it, and the endorsement covers various forms of transportation including rental cars, Lyft, transit and trains,” says Aviva.


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