Canadian Car Insurance

It’s been a little over a year since auto insurance reforms were enacted in the Canadian Province of Ontario. The revamped Insurance Act went into effect on Wednesday, September 1, 2010. Critics of the auto insurance reforms claimed that under the new provisions of the Insurance Act coverage would be reduced, while the cost would stay the same or even increase. A year after the Insurance Act went into effect, politicians had hoped that the reforms would become an issue at election time, although the Liberal Party of Ontario prevailed and the Insurance Bureau of Canada congratulated their re-election.

In the three years that lead up to the reforms, auto insurance rates in Ontario had increased substantially. In 2007, rates raised an average of 0.55 percent, while in 2008 they climbed 5.59 percent. When the Financial Services Commission of Ontario approved an average rate increase of almost 9 percent in 2009, drivers called for revisions. The Insurance Act of 2003 contained provisions for reviewing auto insurance rates every five years. More than 40 reform proposals were formulated by November of 2009, approved in March 2010, and enacted in September of last year.

The reforms were directed at streamlining the process of insuring motorists in Ontario, offering more choices and stabilizing the rates of auto insurance. A notable effect of the reforms was the reduction of coverage. Post-reform standard auto insurance policies now offer $50,000 in medical benefits, instead of $100,000. Rehabilitation and home care benefits have been cut to $36,000 from $72,000. The limit for catastrophic injuries is $1 million, but critics have pointed out that only one percent of auto-related injuries in Ontario actually qualify for such benefits.

More than 60,000 motorists in Ontario are injured in road traffic accidents each year. Twenty percent of accidents result in injuries, for which benefits are capped at $50,000. The bulk of the injuries are of the minor sort -bruises, sprains, strains, and minor trauma. After the Ontario auto insurance system was reformed, coverage was amended to set a benefit limit of just $3,500 for minor injuries. The new lowered benefits aren’t just the lowest in Canada, they are the lowest in all of North America.

Critics of the reform point to the windfall profits it has brought to the insurance companies. Ontario-based Co-operators General Insurance Company recently reported a gain in consolidated net income of $6.2 million, compared to a net loss of $8.9 million during the third quarter of 2010. In the company’s press release, Co-operators General Insurance pointed out that any losses incurred by payments of weather-related claims were offset by the “much-improved claims results in the Ontario auto insurance market.”

On top of the insurance reforms, the Liberal government in Ontario also established an Auto Insurance Anti-Fraud Task Force to combat the growing trend of complex and organized auto insurance fraud rings. Critics of the Liberal Party claim that reforms and the task force have done nothing to curb the rising premiums. The Financial Services Commission recently announced that rates had gone up an average 3.05 percent this year, and that the number of injury claims had increased as well despite the lower benefits.

Extra benefits are available to Ontario motorists who choose to pay higher premiums. Part of the reform initiatives is to offer motorists a greater range of choices. Since the reforms were enacted last years, fewer than two percent of Ontario drivers have chosen to pay for extra benefits.