Canada: Steering Through The New Auto Insurance Rules

Like many people, you may have been too busy to read the letter you recently received from your auto insurance company. Now is the time to crank open that letter and have a good read, since its contents might affect you.

Effective September 1, 2010, there were changes to the standard auto insurance policy which affect both new policies and existing policies (with certain exceptions until renewal of existing policies, as set out in the transitional provisions). The Ontario government intends that with this change, drivers will have more coverage options than what was previously offered when purchasing insurance. The reforms are intended to also stabilize prices, meaning more consumer control in what will be an increasingly competitive market. Drivers can now choose the coverage that makes most sense for their situation and have more choices over what they will eventually pay.

Consequently with this increased consumer "power", drivers should be on the lookout for changes to their existing policy and how these changes might affect them. These changes include new definitions and coverage limitations under the accident benefits section of your policy (also known as the no-fault portion of your insurance, which means that regardless of who is at-fault for causing the accident, you deal directly with your insurer when making a claim).

In the paragraphs below, we attempt to inform you of some of these changes. In no way is this an exhaustive list; we encourage you to consult your insurance company/broker, or visit the Financial Services Commission of Ontario website for more information at: www.fsco.gov.on.ca.

New changes

Minor injury

One of the major changes is the addition of a minor injury definition. As a result of new regulations, under this new definition medical and rehabilitation benefits are limited for minor injuries to $3,500 per claim. This is regardless of the coverage level you may have purchased. What this also means is that where previously you were covered for more (under previous regulations, everyone was covered up to at least $100,000), your compensation for treatment for a minor injury will now be limited, if you are involved in an accident on or after September 1, 2010. Additionally, no attendant care benefits will be claimable for a minor injury.

Coverage

Old Policy (pre-Sept 1, 2010)

New Policy (as of Sept 1, 2010)

Notes/Options

Income replacement benefit

80% of net weekly income up to $400 per week.

70% of gross weekly income up to $400 per week.

Can purchase $600, $800, or $1,000 limits for additional premium.

Caregiver benefit

Up to $250 per week for first dependant, plus $50 for each additional dependant, available for all injuries.

Same limits, but now only available for catastrophic injuries.

Previous coverage available for additional premium.

Medical and rehabilitation benefit limits

Non-catastrophic $100,000 Catastrophic $1,000,000

New Minor injury limit $3,500 Non-catastrophic $50,000 Catastrophic $1,000,000

Increased coverage available for additional premium, however this will not affect minor injury limit.

Attendant care benefit limits

Non-catastrophic $72,000 Catastrophic $1,000,000

Minor injury $nil Non-catastrophic $36,000 Catastrophic $1,000,000

Increased coverage available for additional premium, however this will not add coverage for minor injuries.

Housekeeping and home maintenance

Up to $100 per week for all injuries, up to a maximum of 104 weeks. Coverage continues for catastrophic injuries past first 104 weeks.

Same limit, but now only available for catastrophic injuries.

Previous coverage available for additional premium.

Accounting report regarding income replacement benefits

Not available

Coverage included up to maximum of $2,500.

 

Table adapted from the Financial Services Commission of Ontario website brochure: Providing More Choice to Consumers: What you need to know about changes to auto insurance in Ontario.

Catastrophic injury

Previously for medical and rehabilitation benefits there were only two categories of injuries, namely catastrophic injuries and all other injuries. Under the new regulations, there are three categories of injuries: minor injuries, catastrophic injuries, and everything which falls in between. Catastrophic injury* continues to have higher limits and some changes have been made to its definition. These changes are far more intricate in nature and are best explained by your insurer.

Additionally, some benefits that were previously available will now be limited, or unavailable, unless (a) the person has purchased optional additional coverage, or (b) the injuries are more serious in nature.

Above is a chart which highlights some of these changes.

As mentioned, the information presented in this article is by no means exhaustive. For example, the method of calculation of income replacement benefits will change under certain circumstances beyond the changes described above. Collateral benefits (i.e. payments which you may receive for loss of income from another source) are now deductible on a pre-tax basis even if these payments are taxable. In addition, the interest rate on overdue amounts is being reduced for amounts which become overdue on or after September 1, 2010.

Transitional rules have been set so that some of the coverage reductions won't apply until your first renewal. However, some changes apply immediately, effective September 1st.

Tort deductible and claims

General damages refer to damages for pain and suffering by an injured party or to loss of guidance, care and companionship (claimable by family members). Such amounts can normally be claimed only when the injuries suffered meet a defined threshold, and the awards are subject to tort deductibles** of $30,000 or $15,000, respectively, except in the most serious cases. As of September 1, 2010, you have the option to purchase additional coverage, which would reduce these deductibles to $20,000 and $10,000, respectively.

If you were not at-fault for the accident and the income compensation received from the at-fault insurer is insufficient, you may be able to pursue a claim (commonly referred to as tort claims) for additional income losses by way of a lawsuit commenced against the at-fault party or parties. For accidents occurring on or after September 1, 2010, damages for income loss suffered during the period prior to the date of trial (after a one-week waiting period) will change from 80% of the net income loss to 70% of the gross income. To some extent, these changes mirror the changes in the calculation of income replacement benefit. In addition, there are new provisions, which will affect the manner in which past loss of income is calculated, especially if a person's income is expected to change significantly after the accident.

Confused? So are many others. Soberman LLP's Claims Valuation & Litigation Support Group is often called to assist in organizing the income compensation that may be payable after an accident. However, at that point, if you don't have the right coverage, it will be too late!

Make sure you take proactive steps to get the right insurance for you and your loved ones by learning more about these policy changes. We have listed below a few resources for further reading. We also advise you to contact your insurer.

And remember, drive carefully!

Additional resources

For more information visit the following websites: Financial Services Commission of Ontario www.fsco.gov.on.ca.

Registered Insurance Brokers of Ontario http://www.ribo.com/index.php?.

Terms and definitions

*Catastrophic injury: If you suffer an injury in an accident, you can apply for a determination of whether your injury qualifies as "catastrophic" (e.g. loss of a limb, paraplegia). If the injury qualifies as "catastrophic," you are eligible for an increased level of benefits.

** Tort deductible: The amount that is deducted from a settlement or court award for pain and suffering.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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