Shop Insurance Canada Says Ontario Car Insurance Reforms Are Troubling for Customers and Brokers

November 12, 2016 - Ontario's auto insurance reforms were introduced in the summer as a strategy to reduce premiums in the province, which is the most expansive insurance market in Canada. However, personal injury laywers are arguing that brokers could be subject to lawsuits because of the transfer of accident benefits dispute arbitration to the licence appeal tribunal (LAT). Shop Insurance Canada agrees, and adds it has previously warned that customers will lose out because of accident benefit reforms.

Personal injury lawyers gathered at a panel titled "Resort to the LAT of Last Resort," at the Hilton in Markham, former president of the Ontario Trial Lawyers Association, Jim Vigmond, said insurers need to convince customers to take out higher policies:

"We are trying to educate people about understanding the importance of getting higher benefit policies, higher third-party liability limits, and to those that are selling those policies, the importance of educating their clients," said Vigmond.

Vigmond, a partner at personal injury firm Oatley Vigmond LLP, was participating in a panel debating the LAT process for arbitrating disputes over statutory accident benefits schedule (SABS) claims in Ontario.

That process "offloads almost everything to the tort system and until we get those (third party liability auto) limits up, that's going to be a big problem," Vigmond warned.

Auto insurance reforms introduced in Ontario during the summer were widely praised for helping to lower premiums in the province. However, Shop Insurance Canada was more cautious and argued that changes to the accident benefits would harm customers. The online insurance expert had previously pointed out that customers will lose out, and now brokers are at risk too.

Ontario Auto Insurance Reforms
Nothing is free, so cutting premium rates means consumers need to give something back. The changes to the Statutory Accident Benefit amounts may be more than many policyholders are willing to give, but this is the situation; to pay less you get less.

Benefits for Non-catastrophic injuries are now reduced from a combined $86,000 ($50,000 for medical and rehabilitation and $36,000 for attendant care) to a combined $65,000, although it is possible to increase the coverage (i.e. pay for) to $130,000.

In terms of catastrophic injuries the benefits have been reduced from a combined $2,000,000 ($1,000,000 for medical and rehabilitation and $1,000,000 for attendant care) to a combined $1,000,000 with the option to increase it to $2,000,000 in total.

"The most worrying reform is an overhaul of Statutory Accident Benefits from injuries incurred while in an auto accident, changes that were first revealed last year," Shop Insurance Canada points out.

The prior law stated that any payout to a victim from suing an at-fault driver for injury would be subject to a $30,000 deductible if the awarded amount was less than $100,000. There has always been an issue with this law simply because the deductible was an entirely arbitrary figure and was seen as a way to just take money from victims, sending it right back to car insurance companies.

It meant that a payout of $50,000 to a victim awarded by a judge would result in the insurance provider of the at-fault driver only paying $20,000 after the deductible was removed. Across the board, both now and before, the deductible rule has been kept very quiet, so much so that most drivers do not know about it. More importantly, jurors are also largely unaware as car insurance companies keep the law an almost inside secret in fear payouts would be increased.

The situation has now been made wholly worse by the new regulations announced by the Ontario government in the summer. Now the deductible has been raised to $36,540, so that $50,000 awarded payout from a jury would result in a $13,460 payout by the insurance company. Victims are being hit further as Ontario has also raised the minimum threshold for the deductible from $100,000 to $121,799.

At the panel Flaherty McCarthy partner Todd McCarthy said "Fundamentally what we have is a mixed no fault tort regime. We have a court system for tort and an arbitration system for (accident benefits). It does remain to be seen… is there any residual discretion in the court to entertain any type of dispute between an insured and an insurer that is not specifically within the jurisdiction of the LAT?"

"The $200,000 minimum limit was set so long ago, that it's really no longer relevant," Moore Mandel said. "If there is anyone in this room who does not have more than $1 million of (third party liability) insurance you should probably go speak to your broker now, and that's how we counsel people that we talk to, because I think increasingly with the downloading of ABs on to the tort side, the claims will be in excess of $1 million."

"There won't be (tort) cases that settle within the limits as much anymore," Moore Mandel predicted. "There will be litigation against our insureds personally for any personal assets that they may have and it may increasingly put insurance companies in bad faith positions if they don't resolve claims within limits, so it's something that you really should all look at."

Customer and Broker Concerns
Shop Insurance Canada says it has been worried about the reforms for consumers since their introduction, but now brokers could be impacted.

About Shop Insurance Canada
Shop Insurance Canada is a Toronto based company that specializes in delivering the best auto insurance products to customers around Ontario and Canada. The online quoting tool uses an engine that is easy to use and accurate enough to deliver the best auto insurance quotes from over 25 of Canada's leading providers. Shop Insurance Canada also offers expert advice on the auto insurance industry, as well as guides and news to help customers find the best deal possible.

Shop Insurance Canada works hard to bring all the latest insurance news to customers. We believe that understanding the industry starts with knowing what is happening day to day. Our customers and readers are hugely important to us, and we want them to get the best deals by being involved in the industry. If you have any interesting insurance topics or stories, let us know and we will be happy to look into it and write it up.

Perhaps you have a funny story about your premium evaluations, or maybe a genuine worry about the state of insurance in Canada. Shop Insurance Canada wants your voice and story to be heard, so get in touch with us via our official contact page.

Shop Insurance Canada
1003-60 Bathrust St.
Toronto, Ontario
M5V 2P4
Canada
416-913-0151