2022 Ontario Budget Update

On Thursday, April 28, 2022, the Minister of Finance announced the 2022-2023 Budget for Ontario.

The Budget addresses the government’s plan to ‘create more choice’ for automobile insurance customers in an effort to reduce insurance premiums. The government has not yet disclosed any details as to what changes will be implemented to provide consumers with more ‘options.’ The Ontario Budget indicates that the reform will include a framework for ensuring fairness in rates and increasing access to insurer-provided benefits in a consumer-focused manner.

Important to automobile insurance customers is the operating principle of Mandatory Coverage. Ontario drivers must carry minimal insurance, with the option of purchasing additional coverage, to ensure they are protected in an instance of an accident resulting in damages. The government intends to propose changes that will provide more choice for a consumer in their coverage.

Direct Compensation Property Damage is the concept in which a consumer deals with their own insurance company for property damage claims, regardless of who is at fault for the accident. Previously, Direct Compensation Property Damage (DCPD) was a mandatory aspect of a standard automobile policy in Ontario. This announcement makes DCPD an optional part of coverage. How does this affect consumers? Where a consumer does not purchase this optional coverage, and if their vehicle is damaged at the fault of another driver, the consumer will not be covered for the physical property damage to the consumer’s vehicle.

Further, the government will be reviewing the current requirements that specify that an automobile insurer is the “payer of last resort” for the treatments required by an injured person following a motor vehicle collision. This means that an injured person must exhaust all other insurance policies before turning to automobile insurance coverage.

Creating more choice for a consumer has its pros and cons. On one hand, insurers have historically made poor efforts to educate their consumers on their coverage options which has resulted in a low purchase rate for optional coverages. This means that when a victim of an accident accesses his/her insurance, he/she finds out that he/she doesn’t have the coverage needed. On the other hand, this plan will compel the insurance industry to measure fraud and abuse in the insurance system. Insurers will be required to report on fraud on an ongoing. A new and improved fraud reporting system will better prevent, detect, and deter fraud. Where fraud is prevented, premiums paid by consumers can decrease. This action plan should increase transparency in the automobile insurance industry, and therefore, increase accountability to its consumers.

The government has not yet implemented their 2019 promise to increase the Catastrophic Impairment default limits to $2,000,000, as it was in 2016. At present, persons suffering from catastrophic impairments are limited to benefits up to $1,000,000 over their lifetime. When purchasing insurance, consumers should be aware that spending only a few more dollars on a policy can drastically raise the entitlement to benefits in the event of an accident.