Strained finances force everyone to re-evaluate their priorities. With the rising cost of just about everything in Canada most consumers are looking for savings wherever they can find them. Beyond the monthly mortgage or rent, groceries and travel, auto insurance premiums continue to be a hot topic around dinner table and for good reason.
Car owners in Ontario pay the highest auto-insurance premiums in the country. Inflation, auto theft and supply chain issues are likely to result in higher rates in at least 2024 and likely beyond – unless there's a change.
In March the Ontario government unveiled its 2024 budget which included the promise to "modernize auto insurance for Ontarians by providing them with more affordable options, improved access to benefits and a more modern system".
Giving consumers more options can be a good thing – provided the consumer is educated on their choices.
Standard Benefits
In my experience, most victims injured in an car accident don't have a complete understanding or have forgotten what coverage is (and is not) available to them through their car insurance policy. Unfortunately, it is not uncommon for people to be upset to learn that their standard auto policy doesn't cover what they hope it might. For example, the standard auto policy only covers injured accident victims who are off work for up to $400 a week in an Income Replacement Benefit ($20,800 annually).
Statistics Canada's Market Basket Measure (MBM) is Canada's "official measure of poverty based on the cost of a specific basket of goods and services representing a modest, basic standard of living developed by Employment and Social Development Canada (ESDC)". In 2020 the MBM for a family of four in a city the size of Kingston was $44,340.
This means that for a single-income family the maximum income replacement available through a standard automobile insurance policy might cover half of what the government of Canada says meets the poverty line.
Optional Benefits Now
Currently, consumers already have some choice when obtaining an automobile insurance policy in the form of "Optional Benefits". Optional benefits can include additional forms of coverage and increased limits for things like Income Replacement Benefits which can have a profound impact on an injured person's life and recovery. However, as of 2022 only about 10% of consumers elect to purchase one or more optional benefits. In other words, 9 out of 10 people may already be underinsured when it comes to replacing their pre-accident income if they have to stay off work due to their injuries.
Additional Choice Soon
Particulars of the proposed government reforms remain scarce. There has been some indication that the government will give consumers the option to save on premiums now and remove some benefits like Income Replacement Benefits altogether from their coverage.If only 1 of 10 consumers elects to pay a higher premium for increased coverage then what trends are we going to see if consumers are given a choice to decrease their coverage, and remove benefits like Income Replacement Benefits from their policy?
Informed Risk
It is certainly foreseeable that consumers opt to select lower coverage limits so as to balance their books at home without being adequately educated on the repercussions if they ever have to rely on that policy after an accident.
If you've been in a car accident and think that you were not adequately informed by your insurer or insurance broker about your automobile insurance policy at the time of purchase, give us a call for a free consultation.
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