Canada’s auto insurers are generally pleased with the Ontario government’s direction on auto reform, although many details have yet to be worked out.
“Ontario drivers pay too much for car insurance, and this budget makes a bold commitment to improve a long-broken system,” IBC Ontario vice president Kim Donaldson commented. “Nearly every aspect of auto insurance in Ontario is regulated by the provincial government – but consumers are not benefiting.
“The measures announced in this budget would put drivers on the road to getting a better auto insurance product.”
The budget outlines three main pillars for reducing consumer’s auto insurance rates, including:
More choice for consumers regarding the structure of the auto product
Reducing auto insurance fraud and associated claims costs
Fairer rates through new territorial guidance
Car insurers observe the province’s current territorial rates have not changed for decades. They are open to re-drawing territorial boundaries with common risk characteristics, as opposed to eliminating territories as a rating factor altogether.
“IBC supports premiums that reflect the actual perceived risk level,” IBC says in a statement to Canadian Underwriter. “Under the current territory rules, which are virtually unchanged over two decades, insurers are forced to group drivers together and charge them rates based in part on the risk level in the area they live. IBC is supportive of changes to this.
“Pooling groups of drivers that share similar risk characteristics ensures that drivers pay the most accurate premiums possible. There is a pressing need to update and add flexibility to the rules around the use of territorial risk factors.”
The budget also has Ontario’s provincial regulator, the Financial Services Regulatory Authority (FSRA), acting as the collector of auto insurance fraud data.
“The government is proposing amendments to the Insurance Act that, if passed, would require insurers to provide fraud information to FSRA on an ongoing basis,” the budget document says. “This would hold insurers accountable for managing, tracking and reporting fraud.
“FSRA will also be consulting on the implementation of a fraud reporting service tool that would better prevent, detect and ultimately deter fraud. This is an important step to crack down on fraud and its associated costs. FSRA will be consulting further on proposals for combatting fraud through fraud management plans and removing identified fraudsters through excluded provider lists.”
For car insurers such as Aviva Canada, this is a welcome step beyond an anti-fraud strategy that relies almost exclusively on public education.
“Too many honest Ontarian drivers are unknowingly falling victim to fraud. They need protection,” says Aviva Canada CEO Jason Storah. “We’ve long been committed to raising awareness and educating Canadian customers about fraudulent providers and practices. But this is not enough to solve the problem, which is why we continue to push for industry collaboration and government reform that establishes stricter consequences for those criminals found guilty of committing organized, criminal fraud. The anti-fraud measures outlined in the 2022 Ontario Budget will help address these issues.”
The industry’s next step is to work with the province’s government and insurance regulator to iron out the details. Particularly on how the government proposes to introduce more “choice” for consumers into the auto insurance product, which must provide basic minimums of coverage.
One budget proposal is to allow drivers to opt-out of the purchase of not-at-fault property damage coverage (also known as Direct Compensation – Property Damage). Doing so would save money for consumers who drive older cars that aren’t worth the cost it takes to insure them.
Exactly how much this would save consumers varies, depending on whether the autos are personal cars, commercial vehicles, etc., as IBC points out.
P&C insurers are talking to the government about other auto insurance “options” that would help consumers to save money on their premiums.
“The budget makes a commitment to review the mandatory product and provide flexibility for consumers to tailor coverage to best suit their needs,” IBC tells Canadian Underwriter. “IBC continues to review the specifics of yesterday’s budget announcement, and will work with FSRA and the government on next steps.
“Optionality in coverages has the potential to benefit consumers. Drivers should be able to choose the auto insurance protection that suits their individual/family circumstances.”