What the P&C industry thinks of Ontario’s 2024 budget

Proposed reforms to Ontario auto insurance will make life simpler for accident victims but could increase premiums and costs for insurers, says David Marshall, who’s served as senior advisor to the provincial government on auto insurance and pension funds. 

In its 2024 budget, the Ontario government proposed making auto insurers the first payer for medical and rehabilitation benefits following an accident. 

“This would apply to all automobile accidents, regardless of the injury sustained,” says the budget document, released Tuesday. “The proposed change would ensure that auto insurance companies pay for healthcare costs before extended healthcare plans and it would also help reduce paperwork and red tape for patients and their healthcare providers.” 

As it currently stands, auto insurers are the second payer of medical and rehab benefits. This means if there is another insurance policy in force — such as through the Workplace Safety and Insurance Board (WSIB) or extended care plans from employers — the accident victim has to apply and use up benefits from those policies first before claiming on their auto insurance policy, Marshall says. 

“This has been a big nuisance for accident victims, but it does save auto insurers a lot of money because many policyholders have extended care coverage through their work or professional associations,” says Marshall, who currently consults on financial management and was previously president and CEO of WSIB. 

The proposed change appears to be making auto insurance the first payer. “This is much more convenient for many accident victims who have work-based coverage, but it has the potential to increase costs for auto insurers,” Marshall tells Canadian Underwriter. 

What’s not clear is whether the government will allow auto insurers to recover benefit payments from other plans after the fact, such as the auto insurer paying the medical benefit first and then seeking to recover the amount from the other insurance plans, if they exist. “If auto insurers are not allowed to recover the medical benefits from the other plans, then it will increase benefit costs for auto insurers and potentially increase auto insurance premiums,” Marshall says. 

Optional benefits 

The government also proposes having mandatory auto insurance accident benefit coverage continue to apply to medical, rehab and attendant care benefits, “while all other benefits would become optional.” The Statutory Accident Benefits Schedule (SABS) provides for a host of other benefits; the main one being income replacement benefits for accident victims who have an interruption in their earning ability due to an accident.  

But there are also benefits for lost educational fees if you’re a student, expenses for relatives and visitors to visit the injured person, help with the costs of caring for a dependent, skills training, financial counselling, vocational training, the repair or replacement of some personal items lost or damaged in the accident, and more.

“Each benefit has its eligibility and duration criteria, making the system complex and difficult to understand,” Marshall said in his 2022 report, Time for a Tune-up: Reforms to Private-Sector Auto Insurance could Lower Costs and Add Value for Consumers. 

“It appears that the government has adopted one of the recommendations in my report on auto insurance,” Marshall tells CU. “My recommendation that these ‘other’ benefits be made optional… should result in reduced costs for those policyholders who opt out of the additional benefits, because they don’t need them due to being covered elsewhere or simply because they choose to waive the coverage.” 

Overall, the government is “moving slowly in the right direction” by simplifying life for accident victims and giving them more control over what they choose to buy, Marshall says.  

Insurance Bureau of Canada (IBC) and Aviva Canada agree the budget is a good first step in giving Ontario drivers more control and choice over their auto insurance coverage. “Aviva Canada applauds the government’s leadership for being the first province in Canada to take a consumer-oriented approach that delivers meaningful choice,” Susan Penwarden, the insurer’s managing director of personal lines, says in a statement. 

Related: David Marshall: How to fix private sector auto insurance

Amanda Dean, IBC’s vice president of Ontario and Atlantic, also applauds the “continued $49 million investment to support programs that combat auto theft and destabilize organized crime networks.  

“Across Ontario, auto theft has reached a crisis level,” Dean says in a statement. “This funding is a meaningful and positive step towards better protecting Ontarians and their families.” 

Colin Simpson, CEO of the Insurance Brokers Association of Ontario, acknowledges the current state of auto insurance is a growing concern for consumers across the province. But “as consumer advocates, our caution to stakeholders continues to be to ensure a minimum threshold of coverage is required to return Ontarians to good standing while avoiding complicating the auto insurance product beyond what’s necessary,” he tells CU. 

“IBAO is pleased to hear that the Ford government continues to commit to engage with industry experts and key stakeholders to ensure the final execution of the announced reforms will focus on protecting Ontario consumers.” 

For FAIR (Fair Association of Victims for Accident Insurance Reform), there’s “some cost relief for some Ontario drivers and some improvement in the delivery of care for claimants,” but also a few misses. In FAIR’s view, the biggest miss is the government’s failure to deliver on its 2019 budget promise to increase catastrophic impairment coverage from $1 million to $2 million.  

But FAIR remains optimistic, saying in a statement it hopes for more discussions with government and the regulator to improve the system and care to accident victims. “We feel that many of the issues we care about were heard by this government and though there is a long way to go, it is a brighter path for many people today as we look toward implementation of this new direction.” 

Feature image by iStock.com/zimmytws