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Will The 15% Rate Reduction Affect Coverage?

November 21, 2013

Insurance coverage policy

The Ontario government is making some changes to auto insurance with the goal of reducing overall rates for drivers by 15% in two years. This means that a lot of efforts will have to be made in a variety of areas to get those rates down. The government is focusing on a few areas for the main push to reduce rates; specifically fraud and the way claims are handled. Among the other areas on which the government is focusing is catastrophic coverage, and the definition of such a claim. Drivers may wonder how this, and other changes, may impact the coverage they receive.

Basic Liability Coverage

All Ontario drivers are required by law to carry a minimum amount of car insurance, and can select from optional coverages to complete an auto policy. The basic required coverage will stay the same under the rate reduction plan. The initiatives for reducing rates don’t include any changes to the required coverage for drivers, nor will the coverage on your policy change. The main coverage area that could be addresses is catastrophic coverage.

What is Catastrophic Coverage?

A catastrophic claim is one that is considered be involve very serious injuries that will require long-term medical care and in some cases a lifelong impact on quality of life. An accident in which a motorist loses a limb, or is paralyzed, for example, would be considered catastrophic. The insurance industry is looking to the government to make changes to the definition of catastrophic coverage in order to help insurance companies reduce the highest claim payouts. A change in definition would not likely affect the terms of your policy on a day-to-day basis, but could affect how a claim against your policy for catastrophic injuries is handled.

Optional Coverage

There are any number of options that drivers can choose to add to their policy in order to get better coverage. These options aren’t required by law, but for many people are considered a necessary part of any auto insurance policy. These include your comprehensive and collision coverage, roadside assistance, waiver of depreciation, accident forgiveness, and rental car coverage. Drivers will pay higher premiums in order to add these options to their policy. There is not likely to be any change to the way optional coverage is handled or to the terms of your existing policy in relation to these options.

Can Rates Go Down Without Coverage Loss?

One of the biggest concerns about any rate reduction is whether or not it will mean that drivers have to sacrifice coverage. In this case, there is no intention of affecting the amount or type of coverage Ontario drivers carry. The majority of the rate reduction will come from other areas, and drivers are not expected to be impacted in any manner other than with reduced insurance premiums.

Where The Reduction Will Come From

The reduction in rates will come in large part from efforts to crack down on insurance fraud. Ontario faces a very large problem with fraud, and it is one of the reasons that drivers in this province pay some of the highest premiums in Canada. Large amounts of fraud translate to higher insurance premiums for everyone thanks to the increased payouts from insurance companies and wasted resources in a variety of areas. Reducing this waste will make a difference in the overall cost of insurance. New fraud prevention techniques have already gone into effect but will take some time to show effectiveness. The government has also required insurance companies to comply with new standards and file their rates by January of 2014.

Coverage and Rates

The coverage levels you choose will continue to have an impact on the amount you pay for your insurance. Higher coverage levels and lower deductibles mean a somewhat higher premium, while you can always choose a lower deductible to reduce rates. Shopping around for your car insurance remains the best way to get the coverage you want for the best possible rate, with or without the new rate reduction plan.