A great opportunity to show the value brokers can offer consumers

A new standard automobile insurance policy will come into effect in Ontario on June 1^st, 2016. Compared to the current wording, the new wording contains reductions in coverage, particularly with respect to Statutory Accident Benefits. As stated in a bulletin released by the Registered Insurance Brokers of Ontario (RIBO), the onus is on brokers to make all reasonable efforts to advise their clients of these changes and to document their files accordingly. Given the sheer number of changes and the corresponding options for clients to increase their benefits, Ontario brokers will have their work cut out for them for the next year!

While this may be a lot of work with very little potential for increased commission income, it also an opportunity for brokerages to demonstrate the value they offer the public by dispensing expert advice.

As noted in the RIBO bulletin, consumers buying a new policy or renewing an existing one on or after June 1^st should be made aware of the most significant changes to their coverage. These changes include, but are certainly not limited to:

• Non-Earner Benefit: The current policy provides a modest weekly benefit to students, stay-at-home parents, the unemployed and retirees. Following a waiting period of six months, the current policy pays a benefit of $185 per week for accident victims who have suffered ‘a complete inability to carry on a normal life’. For students, the benefit is increased to $320 per week on the second anniversary of the accident. The Non-Earner Benefit under the current policy is guaranteed for life, although the weekly amounts are reduced after age 65. The new policy reduces the duration of the Non-Earner Benefit to a maximum of two years. The waiting period, however, is reduced from six months to four weeks.
• Medical Benefit, Rehabilitation Benefit, and Attendant Care Benefit for Non-Catastrophic Injuries: The current policy provides a maximum benefit of $86,000 subject to a combined maximum of $50,000 for the Medical and Rehabilitation Benefits and another $36,000 for the Attendant Care Benefit. The new policy contains a combined maximum of $65,000 for all three Benefits. A policyholder can choose to increase the combined maximum to $130,000. As well, except in the case of minors, the new policy limits claims to these three Benefits for a period of five years as compared to ten years under the current policy.
• Medical Benefit, Rehabilitation Benefit, and Attendant Care Benefit for Catastrophic Injuries: The current policy provides for a maximum benefit of $2,000,000 subject to a combined maximum of $1,000,000 for the Medical and Rehabilitation Benefits and another $1,000,000 for the Attendant Care Benefit. The new policy provides a maximum benefit of $1,000,000 for all three Benefits. A policyholder has the option to increase the combined maximum to $2,000,000.
  • Medical Benefit, Rehabilitation Benefit, and Attendant Care Benefit for All Injuries: The new policy provides the consumer with the option to increase the combined non-catastrophic Benefits to $1,000,00 and the combined catastrophic Benefits to $2,000,000. Consumer who take this route will have a total eligible benefit amount of $3,000,000 for a catastrophic impairment.
• Income Replacement Benefit: The current and new policies each provide 70% of gross income to a maximum of $400 per week. However the new policy allows a policyholder to increase the weekly limit to $600, $800 or $1,000 per week.
• Caregiver Benefit: There is no change with respect to the coverage available for catastrophic injuries. However the new policy allows a policyholder to choose to make this same Benefit available to all.
• Housekeeping and Home Maintenance Expense: There is no change with respect to the coverage available for catastrophic injuries. However the new policy allows a policyholder to choose to make coverage available to all.
• Death and Funeral Benefits: The current and new policies each provide a Death Benefit of $25,000 for an eligible spouse and $10,000 for each dependent as well as a maximum of $6,000 for Funeral Benefit. The new policy gives the client the option of doubling the Death Benefit payments and increasing the Funeral Benefit to $8,000.
• Dependent Care Benefit: This coverage is not included under the current or the new policy, however, the new policy provides the option to add this coverage to a maximum of $150 per week ($75 per week for the first dependent and $25 per week for each additional dependent).
• Indexation Benefit: This benefit is not included under the current or the new policy, however, the new policy provides the option to add an inflation adjustment for many benefits.
• Tort Deductible: The current and new policies contain an inflation-adjusted deductible of slightly less than $37,000 for court-awarded compensation for pain and suffering. The new policy allows the client to choose a reduced, non-indexed deductible of $10,000.
• Revised CAT Definition: The definition of catastrophic (CAT) impairment has been tightened in an effort to limit claims to only the most seriously injured persons.

As can be seen, the changes being introduced on June 1^st represent a significant overhaul of the Accident Benefits available under the Ontario automobile policy. For brokers, the challenge will be explaining these changes to their policyholders and then having an informed discussion about the options now available to policyholders who wish to increase the coverage under their policies. Consumers are entitled to the professional advice of their broker about the options under the revised automobile insurance policy. The challenge for brokers will be to find the resources to dispense this advice. As a practical matter, the responsibility of discussing these changes with policyholders will most likely be assigned to licensed Customer Service Representatives. However, all licensed brokers need to familiarise themselves with these changes.

It should be noted that it is also incumbent upon brokers to communicate this information to their clients in a clear and consistent manner and, furthermore, to document their client files to verify the steps that were taken to meet each client’s need for professional advice.

As noted earlier, this may end up being a lot of work with relatively little financial return. But it’s also an opportunity to brokers to provide evidence of the true value they bring to consumers.