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Get ready for changes to auto insurance on Sept. 1

Created on Friday, 27 August 2010

Auto insurance has generated much publicity lately, which has carried over into dealers' showrooms. Here is a summary to address some of the concerns and to clarify questions from customers about pending increases to auto insurance premiums.

On Sept. 1, Ontario insurance companies will introduce changes to basic automobile coverage. These changes may result in premium hikes and reduced levels of coverage.

Some insurance companies plan to base their rate adjustments on a percentage basis, while others will opt for a flat fee amount.

If you live in the GTA, expect your auto insurance rates to rise, even if your driving and insurance claim records are clean.

Insurance companies are making these changes to address rampant fraud and abuse of the system throughout the province — particularly in the GTA.

How widespread is it? It's estimated that insurance fraud in Ontario cost the industry a staggering $1.9 billion last year.

Part of the problem is the very generous medical and rehabilitation benefits that have existed for years. According to the Royal Bank, in 2009, the average auto insurance claim, under the medical provisions, was $53,000.

Compare that figure to Alberta, where the average claim was $3,689, or to Nova Scotia ($5,904).

Another reason the system needs fixing is because of skyrocketing litigation costs. Contingency agreements (where lawyers retain a percentage of a court settlement, as opposed to a schedule fee) permit accident victims to pursue inflated claims for compensation, which often are completely out of line with their pain and suffering.

Today, the courts often award plaintiffs outrageous settlements in comparison to similar adjudicated cases 20 years ago (on a percentage basis), a practice that has served to drive insurance premiums up.

Industry experts also point to excessive spending for medical assessments for people who have been involved in auto accidents. It is estimated that 60 cents of every dollar spent is being spent on assessments.

Under the new system, home assessments for minor injuries will be eliminated, and insurance companies will no longer provide independent assessments for every request for medical treatment.

So, what will the new changes mean to motorists? First, the standard coverage for treatment of non-catastrophic injuries under no-faults benefits will reduce from $100,000 to $50,000. If motorists want more than $50,000 worth of coverage, they will have to pay extra for it.

Even when the new changes come into effect, the standard medical and rehabilitation benefits in Ontario will still be the most generous in Canada, according to the Financial Services Commission of Ontario.

Here's another factor that will affect standard insurance coverage. On Nov. 1, vehicle registration offices in Ontario will now have access to information about insurance coverage.

When motorists renew their vehicle registration, the ministry will know whether or not they have valid auto insurance. This will inevitably lead to the vetting of motorists who drive without coverage.

Vehicle owners, lessees and drivers who don't carry valid auto insurance could face fines ranging from $5,000 to $50,000. They could also have the driver's licence suspended and their vehicle impounded if caught driving with no insurance.

Get ready for changes to auto insurance on Sept. 1
Created on Friday, 27 August 2010

Although statistics on uninsured vehicles are difficult to ascertain, in 2002, the Ministry of Transportation estimated that upwards of 6 per cent of the 7.8 million motor vehicles in Ontario were uninsured.

For more information about insurance rates and coverage, contact your broker or agent prior to your renewal. Policies issued prior to Sept. 1 will remain unchanged until your next renewal.

Many excellent online resources offer more information about the changes to auto insurance. Visit the websites of most major banks, insurance companies and related government agencies.

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