Three reasons the new property damage opt-out is a bad idea for drivers

Upcoming changes to Ontario’s auto insurance rules allowing drivers to opt out of a key piece of coverage are bad news for almost everyone involved in the industry. As a personal injury lawyer, I have several takeaways that I think might add some colour to these new rules.

As the insurance trade magazine Canadian Underwriter reports, the Financial Services Regulatory Authority recently approved the standard endorsement OPCF 49, which allows automobile owners to opt out of the formerly mandatory Direct Compensation-Property Damage coverage.

Opting out means that drivers give up their right to make claims for physical damage to their car during an accident or robbery — including for repair costs, replacement, and loss or damage to the vehicle’s contents — even when they were not at fault, all in the hopes of paying a lower premium. 

There is no question that Ontario’s auto insurance out-of-control premium rates are a problem that needs tackling. A recent report by an insurance comparison website concluded that drivers in the province will pay an average premium of $1,744 in 2023 – an average rise of 12 percent since 2021.

Brampton, Toronto and Mississauga had the dubious honour of topping the charts for premium hikes since 2021, with rates up by 37 percent, 19 percent and 17 percent for drivers in those respective cities, for average 2023 premiums well over $2,000.

Normally, as a personal injury lawyer in Oakville, I would welcome any measure that promises to reduce those costs, not to mention the flexibility it gives consumers who want to tailor coverage to their needs. The problem with these changes is that they look more like window dressing. Read on for the three reasons I think this change is not one the auto insurance industry needs.

1. Almost nobody benefits

As a personal injury lawyer who sees the impact of serious injuries on drivers every day, I would say that accident benefits are by far the most important element of auto insurance coverage.

However, when the average person thinks about their auto insurance coverage, the first things that come to mind are the very issues that OPCF 49 deals with: car repair or replacement following an accident.

I don’t think many people will want to opt out of this most basic form of coverage in exchange for a minor premium saving, especially when they realize they will still have to pay for their own damages, even when another driver’s error caused it.

The one exception may be the small group of automobile owners with older vehicles where repair costs would surpass the car’s value. Even then, I would question the need for this new opt-out. Owners who have no intention of replacing a damaged car already have an effective mechanism for reducing their premium by taking on a larger deductible.

2. It won’t address high premiums

If the uptake on OPCF 49 is as low as I predict, any premium discount consumers can expect as a result of the opt-out is not likely to be significant.

The bigger problem underlying the high prices for Ontario drivers — which the amendments do nothing to address — is the soaring cost of vehicle repairs.

When I review property damage files in my practice as a personal injury lawyer, I’m always shocked by the quotes that come back from garages. Drivers involved in their first accident in some time often consider handling repairs themselves, only to be stunned by estimates much higher than anticipated.

The focus of premium reduction efforts should be on scrutinizing and finding a way to lower these expenses, and some insurers have already begun experimenting with in-house repairs and preferred providers as they seek to rein in costs.

3. Increased broker liability

In a recent LinkedIn post, one veteran insurance broker, John Baizana, raised concerns about the unintended consequences of the opt-out option, reports Canadian Underwriter.

“Baizana’s LinkedIn post generated discussion on how the DCPD change might see brokers susceptible to more consumer misunderstandings — and potential errors and omissions claims — if clients elect to opt out without fully understanding the risk, and then suffer a loss.”

I don’t think many consumers should be interested in taking advantage of the OPCF 49 endorsement when the implications are clearly explained to them.

For some owners, the consequences of the opt-out may only become apparent after they are unlucky enough to have their car vandalized or written off in a crash caused by another driver, and they realize they are responsible for covering their own damages. And the people most likely to be in their crosshairs as they search for someone else to blame are the insurance agents or brokers who secured their coverage.

If you have been injured or your vehicle damaged and would like to speak to a personal injury lawyer in Oakville about your situation, we would be happy to assist or call (289) 529-0404.

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