Ontario Government's Insurance Reduction Not All It's Hyped Up To Be...

Yesterday, our Provincial Government announced that they would be introducing legislation that would reduce auto insurance premiums in our province by 15% "on average." Yay! It sounds great, and if we had an election today, it would certainly buy votes. But will it work? It may, but for the average consumer in the GTA, this will actually make things worse in my opinion. There are a couple of things at play, one being the rules by which policies are issued, and the other item is the word "average."

Insurers issue policies in accordance with the rules they have filed with the Financial Services Comission of Ontario (FSCO). If insurers find themselves forced to reduce their overall premiums by 15%, they will almost certainly become more selective about the risks they do take on. "Good Drivers" will find themselves being redefined. Leeway for 1 or 2 speeding tickets will almost certainly disappear. A third conviction will likely see your insurance policy cancelled. If you run a business, with numerous drivers, you'll find yourself paying much higher premiums for every little infraction your employees have whether they occur on your time or not.

Ontario's Insurers will also tighten up on administrative issues. Often times an ownership is requested, or various other types of paperwork are required. If an individual does not submit the paperwork in time, where currently the insurer calls and asks for it a second or third time, they will likely just cancel the policy. Where presently very few vehicles are insured by the Facility Association (Ontario's insurer of last resort) I anticipate a rise in the number of people being forced to purchase their policies from the most expensive place in the province.

The word "average" is also thrown about, and it must be considered. This allows the insurer to increase their premiums in their higher risk areas such as the Greater Toronto Area, while decreasing their premiums in the lower risk areas such as rural Ontario. So long as the net result is a decrease they would be within the 15% average decrease. GTA residents who are likely to want a decrease may actually see themselves paying more under this plan, while those individuals in outlying areas will enjoy a rate decrease.

On another note, we need to see the recommendations of the Anti-fraud task force implemented.　 Currently there is an estimated $1.6 Billion being spent by companies due to fraudulent activities. The health care clinics and towing operations require legislative changes and are such changes are essential for companies to reduce costs and pass those savings on to consumers.

We should also consider what a 15% revenue reduction will mean for foreign owned insurers. It is quite plausible that many foreign parent companies, will make the decision to leave the Ontario marketplace. If this were to occur, it would result in fewer auto insurers in Ontario and the net result would be upwards pressure on the premiums we all pay.

Someone is going to have to offset the reduced premium revenues this plan calls for, and it's likely going to be the very people in the GTA who would tend to support the idea that will be bitten.

Holiday Shopping & Theft From Your Vehicle...

It’s that time of year again. The mercury is dropping, the daylight hours are shorter and many people find themselves shopping more and more as the holidays near. Though each of us may or may not celebrate a specific holiday at this time of year, most of us do celebrate in the sales and promotions that retailers make available to us. 

Interestingly enough, honest people are not the only ones celebrating.  For the criminal element the holidays represent parking lots full of goodies just ripe for the taking, and almost all of it is brand new, and some of it is even gift wrapped!

The holidays can bring out the best and the worst in some people.  Most of us spread cheer and joy and are in a gift-giving mood; other individuals might wish to exploit the opportunity provided by an unoccupied vehicle loaded with items.  If you find yourself to be a victim of a theft of items from your vehicle where do you make your claim?  Is it your car insurance?  What about your property insurance?  The correct answer:  Both.

In order for you to receive coverage for your vehicle, your policy will need to include a “Comprehensive” or “All Perils” clause.  These optional coverages will respond to the break-in to the vehicle and the damage caused by the forced entry.  It is important to note that Section 7.2 of the Ontario Automobile Insurance Policy (Loss or Damage We Won’t Cover) states, “We won’t pay for loss or damage to contents of automobiles and trailers other than their equipment”.  The automobile policy was designed to insure vehicles only.

It only stands to reason that your property policy will cover those personal possessions which were stolen.  You will need to make an additional claim under this policy.  Both policies will require you to report the theft to the police.

Also remember that owning a home is not a condition of having property insurance; condominium owners and tenants can also obtain this coverage.  Speak to your insurance advisor if you’re unsure.

In the above example you have one occurrence but two claims to make under two policies.  You will also have a deductible applied to each policy.  In some cases you may find yourself dealing with two separate insurers as well.  A simple remedy to this type of hassle can be to insure your property and automobile with the same insurance company.  In most instances if an insurer covers both claims they will only apply the higher of the two deductibles, rather than charge you twice.  You will also have the benefit of only having to deal with one insurer rather than find yourself caught between two companies each stating that a particular item is the responsibility of the other.

In the end it is best to avoid this situation altogether.  Try and park in well lit areas, and avoid storing items in your vehicle then returning to the mall for more shopping.  If the thieves are watching you, they have all that they need to make your holidays that much more difficult.  If you find that you need to drop off some items to your car, get in and relocate it to another area of the parking lot.  The thieves will think you’re leaving and will move on to some easier prey.

Always remember why you went shopping in the first place.  You intended to have an enjoyable experience and make the holiday season brighter and happier for yourself, your friends and family.  A little caution and foresight can help keep it that way.

Parking A Vehicle For An Extended Period Of Time?

When parking a vehicle for an extended period of time, you have three main options. In the insurance world an extended period of time would be anything longer than 45 days. The first option is to do nothing, pay your premiums as you normally would and leave well enough alone. 

The second is what we call a suspension of coverage. In this case the policy is endorsed with a coverage suspension start and stop date, the endorsements are Ontario Policy Change Form 16 & 17. With this option road coverages are removed but liability coverage remains in force (at a slightly discounted premium). The advantage is that if a vehicle is stolen and an accident results the liability coverage will respond if the registered owner is sued.

The third option is to delete all coverages other than the Comprehensive (theft) portion. This saves the most premium dollars, but it also removes liability coverage. In the example above, if the vehicle is stolen and is involved in an accident, a third party could launch a suit. If the liability coverage has been removed entirely, the policy would not respond and it would be the registered owner’s responsibility to defend themselves in court, a costly proposition.

It's a bit of a catch 22. Personally, I prefer suspending coverage if you're going on an extended vacation and know exactly when you'll be leaving and returning. You don't save as much now, but you won't find yourself sleepless because you're being sued due to someone else having stolen your vehicle. It's always better to pay an affordable amount now, rather than having to deal with a larger unknown later.

A Ticket & It's Effect On Insurance...

What does a ticket do to your insurance? The ticket itself does nothing. The ticket is formal notice of a charge against you that you have contravened one of the rules of the road, more than likely the Highway Traffic Act. What will have an impact your risk profile to an insurance company is whether or not you are convicted of the offence you’ve been charged with. The charge carries two main options – plead not guilty, or plead guilty to the offence.

If one pursues the ‘not guilty’ option and is successful, the charges will have no impact on how they are classified by their insurer. On the other hand if they either plead guilty or are found to be guilty, then the charge will be registered as a conviction on their driving record. Insurers use the number of convictions one has as a means of assessing their risk. Section 6 of The Ontario Application for Automobile Insurance asks the applicant to, “Give details of all convictions of the applicant and any listed driver arising from the operation of any automobile in the last 3 years.” It is clear – all convictions registered against an applicant will have an impact for a period of 3 years. The 3 year period commences on the date of conviction, not from the date of the offence.

Convictions are grouped into 3 categories: Minor, Major and Serious/Criminal. Minor offences are those such as, Failure to Yield, Failure to Carry Insurance Card or Speeding no more than 49km/hr over the posted limit. Major offences are ones for which a summons is immediately issued, and the individual must answer for themselves in court, G1/M1 offences are typical of this class. Serious/Criminal offences are just that, serious and possibly criminal. This class includes Impaired Driving, Failure to Remain at the scene of an accident or Failure to Stop for a Police Officer.

Many insurers do not charge more for a single conviction, though the conviction might result in the loss of a ‘conviction free’ discount, the net result of which would be an increase in what the individual pays. If the individual accumulates over 3 minor convictions most insurers will cancel their coverage on renewal. Most standard insurers will also decline to insure anyone with a Major or Serious conviction on their record. For those individuals with multiple convictions or with Major or Serious convictions purchasing insurance will be an expensive endeavour, there are very few insurers willing to take such risks on. To learn more about how a specific conviction may impact your rates, call your agent or broker and ask. The conversation doesn’t impact your rates, but your driving record does – and you’re in full control of that.

Defence's Your Insurer Can Pursue If You're Accused of Negligence.

There are a number of ways that an accused may go about defending a cause of action. A defendant may deny that they committed an act, deny that the act was negligent or deny that the plaintiff was injured. A defendant would have to prove that there was no negligent conduct, even when there has been compliance with applicable statutes. For example, if a party were to allege a slip and fall on another person's property, the defendant could deny that the incident occurred at all. Or they could deny that they were negligent and that the property was free of any ice, snow or any other items that may increase the likelihood of an incident occurring. They could also deny that though the incident did occur, the plaintiff suffered no damages as they were not in need of medical attention, nor did they suffer any financial consequences of the fall.

The defendant can also use a remoteness of damage defense (novus actus interveniens). They must prove that their actions were not the proximate cause of the injuries or damages. The defendant must be able to show that there was an intervening act that broke the causal chain between the defendant’s breach of duty and the plaintiff’s injury. For example Party A strikes Party B. While being transported to the hospital, the ambulance is involved in an accident and Party B suffers further injury. Party A will likely be relieved of liability to Party B for the injuries caused by the auto accident.

A defendant can also use the inevitable accident defense. In this circumstance the defendant attempts to prove that the cause and result of the accident were inevitable, and that the damages occurred from an outside cause which the defendant could not control. This defense isn’t used very often, typically a defendant would deny that they were negligent. An example of this defense being used successfully can be found in Ryan v. Youngs where Mr. Youngs suffered a heart attack while operating a vehicle and consequently struck Mr. Ryan. Mr. Youngs history revealed nothing out of the ordinary and there was no way for him to foresee that he would have had a heart attack that day. The court would eventually rule in Mr. Youngs favour.

You're Crazy If You Think Your Insurance Will Get Cheaper...

That’s right, I said it. Let me clarify. All things being equal, you driving the same car, living in the same house, never getting a ticket or having a claim, your final premium will increase more often than it will decrease.

The obvious question is why? Most people believe that their rates should go down annually if they don’t have any claims. This is a somewhat flawed way to think, after all, if you have no claims and you get a discount every year, eventually, you’ll be paying close to nothing. In order to understand what’s going on with your premiums, we must understand how premiums are calculated from an insurance company’s perspective. Insurance is a funny thing, in that the insurance company has to decide what it will charge before they know what their costs will be. Imagine if a restaurant operated that way…

In order to fulfill it’s promise to pay the claims of it’s clients, the insurance company must have enough money on hand. They must also be able to cover their own expenses and be able to make a profit. The premium charged takes into account what is needed to pay current and ongoing claims. An insurer will forecast trends in costs, and will apply those factors to this year’s claims in an effort to more accurately predict what next years claims will cost. The insurer must also take into account their expenses related to acquiring the business, this could take shape in the form of commissions to brokers and agents, advertising and promotional costs, or a combination of sorts. The insurer also has to cover it’s own administrative expenses such as rents and salaries. Finally, after all of these items have been paid, the end result has to be a profit.

Each year, all of the costs mentioned are escalating, claims are more expensive to settle, employees earn more, medical costs and car parts are more as well. Just as your life is more expensive to live this year than it was 5 years ago, so too is the cost of running a company. So much like a prudent person plans for their cable and gas bills to rise next year, I would suggest you plan for an increase in your insurance premiums, somewhere in the neighbourhood of an average of 3-5%.