Change is Coming for Ontario Auto Insurance

Typically, when people hear the words “change is coming”, it stirs up feelings of uncertainty and perhaps concern. But change is a necessary means to continuous improvement. As Bob Dylan once said, “there is nothing so stable as change”.

In an overall effort to make automobile insurance more affordable in Ontario, the provincial government has introduced a number of changes to the auto insurance system that will take effect on June 1, 2016. If you already have a policy in force prior to this date, the changes will take effect on your policy at the next renewal date that falls on or after June 1, 2016. Summarized in detail below are the following changes that are being rolled out: definition of minor accidents, interest rates for monthly payment plans, comprehensive coverage deductible, and last and perhaps most importantly, Statutory Accident Benefits (SABs).

Definition of Minor Accidents. Insurance companies will no longer be able to use a “minor at-fault accident” that occurs on or after June 1, 2016 to increase your rates. A minor at-fault accident is defined as one in which no payment has been made by any insurer, there are no injuries, and damages to each car and/or property are less than $2,000 per vehicle and are paid by the at-fault driver. This provision is limited to one minor accident every three years.

Maximum Interest Rates for Monthly Payment Plans. Prior to these new reforms, the maximum interest rate for monthly payments was set at 3%. Effective June 1, 2016, this maximum rate has been lowered to 1.3% for one year policies, with corresponding reductions for shorter terms.

Comprehensive Coverage Deductible. The standard comprehensive deductible has been increased from $300 to $500. Policyholders still have the option to quote their deductible at lower or higher amounts, but unless otherwise requested, new policies with this coverage will now be quoted at $500.

Statutory Accident Benefits (SABs). The key changes to Ontario SABs include:

  • Revised definition of “catastrophic impairment”: The revision to this definition is driven by the intention of capturing only the most seriously injured persons. The new catastrophic impairment definition can be viewed as a significant narrowing of the current definition.
  • Reductions in SABs limits: There are three major changes here:
    • Reduction in the benefit limits for non-catastrophic injuries and the duration that benefits are available
    • A major reduction in the scope of “non-earner benefits”
    • A reduction in catastrophic impairment benefit limits

Despite reductions in certain SABs limits, policyholders can still purchase optional increased limits, now at higher limits than previously available. Click here to view a helpful summary chart of the above changes.

Overall, these changes are meant to provide insurance consumers with more flexibility when choosing certain coverages/limits that can affect how much premium they pay. By lowering certain SABs limits, the idea is not to limit coverage for those who need it, but to lower the base amount and give the consumer more choice as to how much coverage they are comfortable with. The benefit of this is also twofold, as lower limits can also deter and prevent fraudulent accident benefits claims.

Change is coming on June 1st, however it is always important to review your coverages and know what options are available to you. Having a knowledgeable broker on your side can help you navigate the technical aspects of your policy, and help you decide what’s right for you.