Province keeps auto insurance costs on its radar

April 6th, 2023  |  Auto Insurance

Ontario’s recent budget has taken aim at making auto insurance more affordable for drivers.

The 2023 budget, announced in late March, outlines plans to introduce improvements which centre on creating more choice, cracking down on fraud, and enhancing fairness within the auto insurance market. It also included updates on previous auto reform initiatives.

The March budget document builds on its 2019 multi-year strategy called “Putting Drivers First: A Blueprint for Ontario's Auto Insurance System.”

The government said, particularly in this period of high inflation, it is concerned about the burden of high auto insurance costs on consumers and expects all participants in the system, including the insurance industry, to work together to keep costs down for consumers.

More specifically, the budget outlines:

Creating More Choice

The current mandatory insurance product may not offer the choices Ontario drivers deserve. The government said it will continue this work by proposing changes that “over time would provide consumers with more options when purchasing automobile insurance.”

Cracking Down on Fraud

Fraud is a major driver of costs in the auto insurance system and the government, along with the Financial Services Regulatory Authority of Ontario (FSRA), are committed to cracking down on bad actors.

Ontario has empowered FSRA to request fraud information from insurers on an ongoing basis. FSRA is also working on the development of a fraud reporting tool that will be used to hold insurers accountable for managing, reporting and tracking fraud and will assist in fraud detection, prevention and deterrence.

Enhancing Fairness

In 2022, the government requested that FSRA review the issue of postal code ratings to ensure that drivers are treated fairly when purchasing their mandatory policy.

“The government will consider FSRA’s findings as it moves forward,” a portion of Ontario’s 2023 budget read.

The Insurance Bureau of Canada applauded the government’s budget plan. It has identified increasing insurance premiums as a challenge to driver affordability and is committed to acting. IBC stated this budget demonstrates the government's focus on improving auto insurance in the province.

"It is clear the government is committed to making driving less expensive for Ontarians," said Kim Donaldson, IBC’s Vice-President, Ontario, said in a statement following the budget’s release. "IBC and its members stand ready to work with the government and all other stakeholders interested in making auto insurance more affordable for drivers."

“The new part of [the 2023 budget] is the solid acknowledgment, the fact that [the provincial government] is considering options, so they are working on it,” Insurance Brokers Association of Ontario (IBAO) CEO Colin Simpson said in an interview recently. “I think they indicate that they didn’t tinker around with it. The fact that they’re saying they’re considering options is actually quite positive.”

According to the province, since announcing its strategy to reform auto insurance in 2019, the government and FSRA have made significant progress on their commitments, including:

• Increasing competition, by making it easier for insurers to offer more discounts and options to consumers such as incentive and rebate programs.
• Increasing innovation, by enabling insurers to develop usage‐based (telematics) insurance programs. The government has also enabled FSRA to operate an auto insurance regulatory sandbox that allows insurers to pilot other innovative initiatives.
• Increasing consumer convenience, by enabling electronic communications for customers, including offering electronic proof of auto insurance.
• Increasing consumer choice, by making it optional to purchase not‐at‐fault property damage coverage (also known as Direct Compensation – Property Damage). This change will come into effect on January 1, 2024.
• Enabling a FSRA rule that defines unfair or deceptive acts or practices to make the oversight of insurance more transparent, dynamic and flexible. This rule ensures consumers are treated fairly, while enabling insurers to offer rebates or incentives.

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