Brokers Face Risks as Insurance Changes Go Into Effect This Summer
Summer will bring some serious changes to the auto insurance industry in Ontario. The changes come on the heels of a promise to improve the affordability of auto insurance premiums in the province—a promise that is being fulfilled, but with a catch.
While premiums will drop, coverage isn’t going to remain at a constant. Drivers will pay for their lower costs with less coverage and fewer benefits and the elimination of some enhanced coverage options according to Ontario’s Financial Service Commission. This is particularly noticeable in the case of rehabilitation and medical coverage. Both will be combined and bundled with attendant care, creating a single benefit. This will apply to non-catastrophic and catastrophic claims alike.
The net result is that, on the client side, injury victims will bear the brunt of the negative effects of the changes to auto insurance.
Brokers at Risk
But brokers aren’t immune to risks brought on by these changes, either. That’s because, in combination with already low liability minimums, the lower injury coverage may well result in accident victims being more prone to seeking lawsuits against policy holders in order to get adequate compensation for their injuries.
This could leave brokers vulnerable to lawsuits themselves, especially if they are not diligent in educating their clients about the potential need for more coverage. With the insurance system not providing adequate resources for injury victims, involved parties are going to seek other avenues to recoup their losses, and brokers may find themselves in the crosshairs.
Opportunities for Education
Brokers will have a challenge on their hands when it comes to educating clients. A recent Insurance Brokers Association of Ontario (IBAO) survey indicates that nearly half of all consumers are completely unaware of the changes to come. The new changes will go into effect in June, but will not affect individual policy holders until their policies are up for renewal.
Because of this, brokers should be particularly focused on meeting with and educating their clients when these renewals occur. Clients should be encouraged to thoroughly review their policy packages, and should communicate with their broker to ensure that they understand the changes contained therein.
Silver Linings
Brokers will have some good news to deliver to their clients as well, however. For example, insurers’ fees will be reduced on monthly (as opposed to yearly) insurance premiums. In fact, they’ll be more than halved, from three percent to less than 1.5 percent. Another positive change is the categorization of fender benders resulting in less than $2k damage with no injured parties—these will no longer be considered to be at-risk accidents.
The Takeaway
Everyone at every step in the insurance chain should be proactive in educating themselves about these upcoming changes. Brokers, however, are in a particularly vulnerable—and responsible—position. They are best situated to help their clients become aware of the upcoming changes, and they may end up paying the price in court if they don’t. Don’t wait until policy renewals start coming in after the first of June—start learning (and teaching) now.