How Ontario’s government helps auto insurance customers with rebates
When COVID-19 erupted across Canada prompting the federal and provincial governments to declare public health emergencies to contain its spread, it sent the economy into a tailspin, tossing millions of Canadians out of work. Fearing they would not be able to meet their monthly financial obligations consumers demanded their auto insurers reduce their premiums since they wouldn’t be commuting to work each day or driving at all.
Canada’s six largest banks did not hesitate to collaborate in mid-March to help homeowners during the coronavirus lockdown. They came up relatively quickly with a unified approach to help mortgage holders by way of flexible payment plans and deferrals. Consumers and insurance brokers agreed insurers should follow suit. It made sense: people are driving less, and there are far fewer collisions on our roads.
The Insurance Bureau of Canada (IBC), the national industry association representing 90 per cent of Canada’s private home, auto, and business insurers, shared the same perspective. IBC issued a media release on March 19 stating insurers are committed to working with their customers during the pandemic. IBC also advised consumers who have questions about their current insurance coverage or concerns about their ability to continue to pay their premiums due to the impact of COVID-19 to contact their insurance representative to discuss a potential solution. It was a tentative first step but a necessary one.
However, that IBC media release also made clear it’s unlikely insurance companies would present a unified set of solutions like the big banks. Auto insurance is not a one-size-fits-all product. There are many different options available to consumers to choose from when purchasing car insurance. Insurers tailor auto insurance coverage based on a driver’s unique needs, driving profile, and history. Nevertheless, insurers recognized Ontarians’ frustrations and concerns and sought to make changes by offering premium rebates and discounts to help their customers.
But there was a problem: despite the Ontario government’s early posturing before the media, in provinces with private auto insurance like Ontario, it is the provincial regulator which calls the shots. Auto insurance rates are heavily regulated. The Financial Services Regulatory Authority (FSRA) – Ontario’s provincial regulator – reports to Ontario’s Minister of Finance. FSRA oversees how insurance companies operate and must approve of any premium reductions or rate hikes auto insurers want to implement.
By mid-April, FSRA obliged by paving the way for insurers to reduce auto premiums and offer car insurance payment rebates for up to 12 months.
FSRA’s Regulatory Changes Gives Ontario Residents a Break on Auto Rates
For besieged consumers who found themselves suddenly unemployed and fretting over how they could meet their monthly financial obligations, FSRA’s decision was welcome news. Though insurance companies were free to decide how much of a discount to offer their customers, FSRA stated rebates must be “commensurate with the scale of duress that Ontario families are under.”
To help customers and insurers understand what a fair premium is during and after the COVID-19 lockdown, FSRA issued an advisory detailing the emergency relief measures it approves and explaining how auto insurers can provide additional relief measures to consumers without its approval.
In essence, FSRA okayed a range of insurance relief measures. It permitted insurers to make emergency relief rate filings to reduce automobile insurance rates, offer discounts, and a variety of other actions to use to assist customers at the insurer’s discretion such as removing fees and changing usage-based insurance programs. Insurance companies do not need FSRA’s authorization to provide consumers with more flexible payment plans.
For consumers whose driving habits changed significantly due to the pandemic, most of Ontario’s auto insurers reduced premiums to reflect the reduced risk for three months. It is estimated the changes could save Ontario’s drivers $600 million.
For Ontario’s 10 million auto insurance customers, if they are not driving at all, they can go a step further and temporarily suspend their car insurance coverage. Once they know they will be on the road again, they can reactivate their policies.
Like the COVID-19 crisis, the premium rebates and discounts are unprecedented in Ontario’s history – when was the last time you recall a double-digit auto rate cut? Some may say the current rate relief measures don’t go far enough. But slashing car insurance rates across the board by 50 per cent is impractical since it is not rooted in actuarial science (which is what FSRA and insurers rely on to determine premiums). In other words, the math doesn’t add up.
Where Do We Go From Here?
While it’s anyone’s guess when the COVID-19 lockdown will be lifted and businesses will rehire the workers who were laid off, the relief measures auto insurers rolled out will remain in place until FSRA revokes them.
But more good news for consumers came in late April when FSRA decided to delay posting its first-quarter Ontario car insurance rate change information. By doing so, FSRA and the industry can continue to focus on continuing to deliver consumer relief. Many insurers had already proposed delaying implementation dates for rate hikes until the end of the declared emergency as part of their overall approach to providing relief measures for their customers.