The pandemic has impacted several aspects of daily life since it began in March 2020. When it comes to driving, many people are doing much less of it, having been relegated to working from home for most of the past year and a half. The decline in cars on the road has resulted in fewer accident claims, but has this cost-savings been passed on to the consumer? Some are saying that insurers are experiencing a windfall due to a decline in claims without a corresponding reduction in premiums.

Further, while accidents and claims have dipped overall, there has been a demonstrated increase in charges and accidents related to stunt driving in Ontario. The issue has prompted the introduction of new legislation aimed specifically at curbing stunt driving incidents, which some are saying may cause insurance premiums to increase.

Due to the expense of auto insurance and the reduction in daily commuting, some Ontarians are turning to “pay as you drive” options for insurance coverage. What does this type of plan look like, and could it be a valid alternative to traditional auto insurance for drivers who are still mostly working at home?

Below, we examine how the COVID-19 pandemic has impacted auto insurance in Ontario and what it may mean for the industry and drivers going forward.

Are Ontario Auto Insurers Experiencing a Windfall?

According to a recent article from Insurance Business Magazine, Ontario automobile insurers have experienced a marked increase in profit since the start of the pandemic. While several major car insurance companies offered discounts to drivers who drove less, auto insurers in Ontario still saw a profit of $3.63 billion in 2020. At the same time, premiums increased overall to $198 million during the same period.

Many insurance companies announced discounts for infrequent drivers in early 2020, but those discounts were largely eliminated by fall of that year. As early as October 2020, critics were claiming that insurers were benefitting from a “windfall” due to fewer claims combined with stagnant or even increased premiums.

Insurance Companies Say Drivers Have Benefitted Overall

The director of consumer and industry relations for the Insurance Bureau of Canada disputed this claim, saying that discounts had “returned approximately a billion dollars to support affected drivers“.

According to data cited by Driving.ca, Ontario premiums decreased overall by 5% in the first quarter of 2021, with the average premium dropping by 10% in the first quarter of this year, compared to the last quarter of 2020. While some industry insiders said that many drivers will see relief on their renewal premiums in 2021, people should be cautioned that these benefits will be applied based on an individual’s overall driving record.

One insurance company’s service team leader explained that “[i]t’s not going to be everyone seeing a broad percentage decrease. It is still specific to each individual driver”.

Stunt Driving Incidents on the Rise, Possibly Impacting Insurance Rates

While claims and accidents overall are on the decline, stunt driving has been on the rise since 2020. Perhaps owing to fewer cars on the road, some drivers have used the opportunity to engage in more dangerous behaviours when behind the wheel. Under Ontario law, stunt driving encompasses several infractions, including:

  • Driving 50 km/h or more over the posted limit, when the posted limit is above 80 km/h
  • Driving 40 km/h or more over the posted limit, when the posted limit is 80 km/h or less
  • Driving at a speed of 150 km/h or above
  • Street racing
  • Intentionally cutting off other drivers or driving too close to another car
  • Tire squealing, doing doughnuts, or burning out
  • Driving without regard for road conditions or other relevant circumstances
  • Careless driving without concern of endangering others

The issue has become so pervasive that it prompted the introduction of new legislation targeting stunt driving called the Moving Ontarians More Safely Act, 2021. Last month, penalties associated with stunt driving have increased, including longer licence suspensions and increased fines up to $10,000.

Examining “Pay as You Drive” Insurance Options

Some drivers, looking to save on costs, have opted for a type of insurance called “pay as you drive” or usage-based insurance. Instead of paying a set monthly premium for coverage, drivers install a telematic device in their cars to track driving habits with the cost of coverage based on annual mileage. For example, a person who drives 5,000 km per year would pay significantly less in premiums than someone who drives six times that amount.

Devices can also discern other behaviours, from how hard a person steps on the brake pedal, whether they exceed the speed limit and by how much, or if they use their phone while driving. Some insurers offer incentives for good drivers and apply discounts for those who observe the rules of the road, drive less often, and refrain from putting excess wear and tear on their cars.

According to the Globe and Mail, usage-based insurance plans have been available in Canada since 2013. Recently, however, Ontario and Alberta amended their laws to allow insurers to raise insurance rates for drivers who frequently violate the rules of the road or drive in a manner that deteriorates their car’s condition. So far, only two of the eight insurers who offer performance-based premiums are adding surcharges for bad driving, but others will likely follow suit.

The pandemic has seen many changes to how we drive and how much, and as a result, the automobile insurance industry is changing to adapt. How these changes will unfold, and whether they will result in new types of insurance litigation, remains to be seen. We will continue to provide updates as changes occur.

Contact Insurance Lawyers at Tierney Stauffer LLP For Exceptional Legal Representation in Insurance-Related Matters

Dealing with an insurance company after you have been injured in an accident can be frustrating and time-consuming. At Tierney Stauffer LLP, our experienced insurance lawyers have over 35 years of experience advocating for those who have been injured in motor vehicle accidents or denied insurance benefits. We recognize that no two injury claims are the same, which is why we give each claim the personalized attention needed to protect your rights and bring about the best possible outcome. Call us at 1-888-799-8057 or contact us online to set up a free consultation with a member of our team.

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