Ontario Liberals Release “Customized” Auto Plans

The Ontario Liberal government has released a discussion paper outlining its plans for a new auto insurance system including “customized coverages” for accident benefits (AB).

The Ministry of Finance has posted the discussion paper on its website and is asking for feedback by September 10 of this year on the proposal. The basic plan would see policyholders able to “buy up” by adding benefits and paying higher premiums than exist with the current standard AB section of their policy. They could also “buy down” by refusing certain coverage.

Certain parts of the AB coverage would remain in place, including: medical/rehabilitation, attendant care, case manager services, funeral and transportation expense benefits. Policyholders could turn down benefits relating to three “bundles”. These “bundles include:

No income replacement;

No dependants; or

No minor losses.

As well, a policyholder can purchase additional coverage for income replacement, caregiver and dependant care, medical/rehab and death/funeral benefits. For example, existing income replacement benefits stand at $400 per week, whereas additional coverage for $600, $800 or $1,000 per week could be purchased. By the same token, this coverage could be refused altogether.

The paper suggests several scenarios where reducing benefits might make sense for a policyholder, such as when collateral benefits are already in place (e.g. workplace disability benefits), or in the case of minor losses such as clothing damaged in an accident which the policyholder might not care to replace. “Insurance companies, brokers and agents will have a greater responsibility to publicize, raise consumer awareness and provide advice to their clients,” the discussion paper notes. It adds that the program would be phased in over a year, as policyholders buy or renew coverage.

Insurers are pleased to see the government recognizing the need for more choice for consumers, says Mark Yakabuski, Ontario region vice president for the Insurance Bureau of Canada (IBC). “We’re delighted the government has come out with a proposal for customized coverage, and the recognition that there needs to be choices.” However, he adds, “any premium savings will be proportional to the options being put on the table. We would need to have claims savings.” The IBC is currently reviewing the proposal and “costing out” the various options to see if significant savings will be provided.

Also, Yakabuski says the government could still go further in creating greater choice, for example by looking beyond the AB portion of the policy. The IBC will be working on its submission to the draft paper in the coming weeks, he confirms.