Although Ontario motorists can legally put their vehicles on the road with as little as $200,000 in liability coverage, brokers likely wouldn’t want one of those motorists for a client.
“There is no way you can justify why you sold someone a $200,000 [auto] liability policy,” Rick Orr, Stratford-based owner and account executive at Orr Insurance Brokers Inc., said Friday in an interview.
As a general rule, Orr’s private passenger auto clients carry $2 million in coverage because awards from successful motor vehicle accident lawsuits are sometimes well over $1 million. So the fact that Ontario private passenger vehicle owners are only required by law to buy $200,000 in liability coverage is “totally antiquated,” said Orr, a former president of the Insurance Brokers Association of Ontario.
“It seems odd that nobody has updated it,” said Orr. “We don’t have a single client that would have less than $1 million in liability coverage.”
Orr says it’s not hard for brokers to up-sell to $2 million, partly because the client only has to pay an extra $100 or so a year in premium.
“The last time I looked, which was a long time ago, the [annual premium] difference between $200,000 and $1 million wasn’t much,” he said. “We will get some people who say they don’t need $2 million, but nobody in a long time has ever said they would want less than $1 million in coverage.”
Most brokers realize it would become an errors and omissions risk if they were to sell a client a liability policy with a limit of only $200,000.
“There are all kinds of incentives to make sure consumers are properly protected, because if not, they are coming after us at the end of the day,” Orr said.
Saskatchewan also mandates $200,000 in liability coverage. Unlike Ontario, however, the Saskatchewan government has a monopoly on basic auto through the public insurer SGI. In Saskatchewan, the basic plate coverage has created an issue.
About half the motorists in Saskatchewan have only “base plate coverage,” Dave Pettigrew, president and CEO of brokerage Harvard Western Insurance, told Canadian Underwriter in 2018. At the time, the Insurance Brokers Association of Saskatchewan formed a committee to make sure that motorists in the province were adequately insured.
In Ontario, there is more than one reason to buy liability limits far in excess of the mandatory minimum. “Another reason you should be carrying higher liability coverage is [that] you are actually protecting yourself against people who don’t carry enough,” Orr said Friday.
For example, an optional family protection endorsement provides coverage if the broker’s client gets hurt, sues the at-fault motorist, and the at-fault motorist turns out to be underinsured. As Orr explains, using a hypothetical example: “If I get hit by a 17-year old who has $500,000 or $1 million in coverage, and they do $2 million in damage to me, and I sue them, my [family protection endorsement] will make up the difference to what my liability limit is.”
New technology is making cars much safer than they used to be. But those features aren’t translating into lower insurance rates — since those fancy new components cost a lot more to repair and replace.
Modern safety features such as automatic emergency braking, frontal collision warning and lane departure assistance are automating the process of driving more than ever before, and are giving drivers more tools and information to avoid some of the most common accidents.
But they don’t make today’s cars crash-proof. And when collisions happen, those high-tech tools make cars a lot more complicated and expensive to repair.
Take headlights, for example. A generation ago, a car’s headlights were fairly standard — just a bulb, as bright and long-lasting as possible, and a casing to point it in the direction of the road ahead. Given their position on the car, the headlights are one of the most common parts that would see damage in a collision, whether it’s a mere fender-bender or a head-on collision. But the cost to replace a headlight would be a couple of dollars.
Today, that same headlight could well be equipped with technology that allows it to dim itself depending on light conditions, and the light actually moves into a turn so the driver can better see oncoming dangers. Those are great features, but they come with a hefty price tag — $1,371 US on average to replace a modern headlight, according to CCC Information Services, an analytics firm that provides data to car manufacturers, the insurance industry and body shops.
Headlights aren’t the only culprit. A basic fender or bumper cover can cost hundreds of dollars to replace, thanks to the series of telematics, radar and other camera-based sensors it likely contains.
Add it all up, and basic components that used to be nothing more than metal and plastic can now cost thousands to repair and replace. And most of them need to be calibrated to communicate with a vehicle’s internal computer, which is work that only a skilled technician can do.
“There’s a lot more to repairing a vehicle in a collision than there was in decades gone by,” said Peter Karageorgos, the director of consumer relations at the Insurance Bureau of Canada.
Cost of crashes ‘going up’
Karageorgos said today’s cars may indeed be built safer than ever before, but that doesn’t mean crashes are becoming less likely. With more vehicles on the road and more distracted driving, the number of collisions is still going up. According to the IBC, the insurance industry paid out just over $12 billion to just over 1.2 million car insurance claims last year, a number that is just shy of 2017’s record level, which itself came after five straight annual increases, compared with $8.8 billion in 2011.
“You may be in a safer car, that may lead to a reduction in the number of injuries or extent of injuries, and that’s a good thing,” Karageorgos said. “But we are seeing repairs and frequency going up, and the severity or cost is also going up.”
Police agencies across Canada have identified distracted driving as a major cause of accidents, and Karageorgos said driver complacency is undoing some of the leaps forward in modern safety technology. “We may have lane departure sensors, but does that mean drivers are no longer doing a shoulder check? Are practices behind the wheel suffering because we are relying on technology?”
Susanna Gotsch, an analyst with CCC Information Services, said part of the problem is that most of the new safety features have shown some success with some of the most common types of collisions, but they are far from perfect.
Automatic emergency braking is a great example. One of the testing protocols for the technology at the National Highway Traffic Safety Administration, Gotsch said, is that a vehicle must prove it will automatically apply the brakes if it senses an oncoming obstacle on a dry road, with no debris, on a sunny day. “The vehicle has to demonstrate that it will apply the brakes,” she said. “It doesn’t say that it has to stop completely, it just has to show that [it] applied the brakes if the driver has not.”
So under an ideal circumstance, that technology can help make injuries less severe by slowing the car down as much as possible if a driver is distracted and has forgotten to brake before driving into the red lights in front of them. But that’s a long way from making the vehicle crash-proof.
Next, Gotsch cites the example of a car with automatic emergency braking getting into a common fender-bender at a slow speed in a parking lot. “Even if you have it, if somebody backs into you, you can’t say, ‘Don’t back into my car,'” she said. And you’ll still have to pay a higher repair bill to recalibrate those sophisticated sensors after the accident.
Indeed, most of the new technologies may save a life or avert a serious accident under ideal conditions, but they don’t do much under other conditions. She cites the famous example of a man in Florida who was killed in his Tesla in 2016 while the Autopilot function was engaged, after his vehicle crashed into a tractor-trailer that was legally crossing the roadway.
“The technology worked as designed to see objects in the front of the vehicle, not objects coming from the side,” Gotsch said.
To be clear, no one is suggesting that the suite of modern safety features aren’t making cars safer in the aggregate. Gotsch said data from the Insurance Institute of Highway Safety does suggest that there is a benefit in a large number of cases. “There is a reduction of claim frequency in certain types of scenarios,” she said. “But what hasn’t borne itself out yet is what the flip side is on the cost side, whether they are outweighing each other.”
“We haven’t really seen the full benefit yet from a cost perspective.”