WHY AUTO INSURANCE IS SO EXPENSIVE

There are many documented cases of auto insurance fraud (see G&M article, here, and Project 92),  in Ontario, and fraud is a major contributor to our auto insurance premiums. Much of this fraud loss exploits the “Accident Benefits” portion of coverage. Accident benefits coverage is an extremely important part of insurance coverage, and is mandatory in all auto insurance policies in Ontario. To combat the rising costs of auto insurance in Ontario, the Government recently reduced the minimum limits required under this portion of coverage. This effectively meant that the Government felt that people claiming under the Accident Benefits coverage were not deserving of a reasonable amount of insurance (we must all be making fraudulent claims.) This is just another example of the Government spending a lot of time, energy and (our) money addressing the symptom and not the disease. Therefore, it is has been strongly recommended that you dig even deeper and make sure you buy-up the accident benefits coverage to a more reasonable amount.

But that is not all you can do. After spending a bundle to reduce insurance benefits, the Ontario Government has also come up with a website, here, describing the Auto Insurance Anti-Fraud Task Force, establish in 2011, which offers tools to citizens to identify and combat auto insurance fraud, here.

Unfortunately, we can’t just blame Ontario Auto Insurance premiums on Fraud. This decision by the Financial Services Commission of Ontario (FSCO), here, is a perfect example of where your insurance premiums are going. But before providing a very brief description of the event, it is important to know that we recognize this accident it a tragedy and we in no way intent to discount the severity of the injury or the pain and suffering of the individual or his family. An inebriated 62 year old man, riding in a luxury limousine coach, decided to do a headstand against a pole in the centre of the moving bus, to entertain his friends. The
insurance company denied his claim based on the action being outside “the ordinary and well-known activities to which automobiles are put.” They said his actions were “dangerous and excessive.” The FSCO arbitrator determined that based on the vehicle being a “party vehicle”, the actions of the injured party “fell within the normal use and operation.” There is no mention of actual insured losses, but it was a catastrophic injury, which are commonly in the millions of dollars.

There is probably not a lot we can do about the decisions of judges and adjudicators, but, instead of simply partaking in the apathetic activity of complaining about insurance premiums, we should at least try to educate ourselves on the detection and prevention of insurance fraud.

CAUTION: This article does not constitute a legal opinion or insurance advice and must not be construed as such. It is important to always consult a registered and truly independent insurance broker and a lawyer who is a member of the Bar or Law Society of the relevant jurisdiction with regard to this material before making any insurance or legal decisions. All material is copyrighted by Mitchell Sandham Inc. and may not be reproduced in any form for commercial purposes without the express written consent of Mitchell Sandham Inc. Anyone seeking to link this document from any external website must receive the consent of Mitchell Sandham Inc. by sending an e-mail to gshields@mitchellsandham.com.