Ontario Automobile Insurance Policies: Are you getting your money’s worth?

Profitability of Ontario’s Insurers

Ontario’s automobile insurance companies have been very profitable over the last decade. On April 10, 2015, CBC News reported on a study by the Ontario Trial Lawyers Association (“OTLA”). The study revealed that between 2001 and 2013, Ontario consumers may have overpaid between $3 billion and $4 billion for automobile insurance. The study revealed that in 2013 alone, Ontario drivers may have overpaid by $840 million for automobile insurance ( http://www.cbc.ca/news/business/ontario-drivers-overpaid-840m-for-auto-insurance-a-year-study-says-1.3028074 ). The OTLA Study looked at 18 of Ontario’s largest auto insurance companies and found that they had returns on equity of 14.9% in 2012 and 17.5% in 2013. These returns were higher than the benchmark set by the Financial Services Commission of Ontario (see article here).

It is clear that Ontario’s large automobile insurers have been making healthy profits on the premiums paid by consumers. This begs the inevitable question: Over the past decade, have Ontario consumers been getting more value from their automobile insurance policies?

Statutory Accident Benefits

Significant changes to the Statutory Accident Benefit Schedule (“SABS”) came into effect on September 1, 2010. These changes reduced the standard benefit levels available to Ontario consumers. As a result of the amendments to the SABS, a new Minor Injury Guideline (“MIG”) was introduced. The MIG restricted Ontarians with injuries deemed by their insurer be predominantly “minor” to only $3,500 in medical and rehabilitation benefits. Furthermore, housekeeping and caregiving benefits were no longer part of standard automobile insurance policies. Income Replacement Benefits were capped at $400 per week regardless of pre-accident income (unless a policy holder consciously chose to pay an even higher insurance premium for increased income replacement up to $1,000 per week).

By 2015, five years had passed since September 1, 2010. Despite five years of increases in the cost of living and five years of inflation, Income Replacement Benefits remained capped at just $400 per week.

Ontarians with collision related injuries deemed to be predominantly minor were still limited to $3,500 in medical and rehabilitation benefits. The $3,500 limit had not been increased at all to address inflation and the increased costs that many rehabilitation treatment clinics have faced over the past five years due to inflation.

When the 2015 Ontario budget was introduced by the Wynne government, it brought in significant changes to the Statutory Accident Benefit Schedule. These changes apply to policies issued or renewed on or after June 1, 2016. The changes reduce the monetary value of Accident Benefits available to Ontarians.

Currently, injured persons whose injuries are outside of the Minor Injury Guidelines but who are not deemed Catastrophic are eligible for up to a maximum of $50,000 in medical and rehabilitation benefits, as well as $36,000 in attendant care benefits. These two amounts add up to $86,000.

After June 1, 2016, a new standard benefit combining medical, rehabilitation and attendant care benefits will be capped at only $65,000. This represents a reduction of $21,000 in medical and rehabilitation and attendant care benefits.

Currently, injured persons whose injuries have been deemed Catastrophic are eligible for up to $1 million in Medical and Rehabilitation Benefits and up to $1 million in Attendant Care Benefits.

Catastrophically injured Ontarians include persons with brain injuries and spinal cord injuries. Shockingly, the changes to the SABS will reduce those benefits to catastrophically injured persons by 50%. As of June 1, 2016 a new combined medical, rehabilitation and attendant care benefit of $1 million will be available for catastrophically injured persons. This means that catastrophically injured persons, who are often brain injured or paralyzed, will see a drop of 50% in the quantum of medical and rehabilitation and attendant care benefits available.

To be fair, Ontario motorists do have the option of purchasing optional Accident Benefits. Optional Accident Benefits can provide you with up to $1,000 per week in Income Replacement Benefits, as well as optional caregiving, housekeeping, and attendant care benefits. However, consumers have to pay a higher premium for optional benefits.

What is clear is that Ontario’s insurance companies are making significant profits. It appears that Ontarians have overpaid by billions of dollars for their insurance policies since 2001. Ontario’s government has consistently reduced the monetary amount of Accident Benefits available to consumers. The trend is clear that consumers in Ontario are paying more and more to their insurers, and they are getting less and less in Accident Benefits with each amendment to the SABS.