C14 - Auto Insurance ON Flashcards
ALL CHAPTERS
What is a Plaintiff?
The party who initiates a lawsuit against another party (the defendant) in a civil case.
What is a Defendant?
The party being sued in a civil case.
What is a Lessee in Auto Insurance?
A person or entity that leases a vehicle and holds it under a lease agreement.
What are accident benefits in auto insurance?
They are a first-party coverage that provides financial support for medical and rehabilitative care, wage loss, home care, and survivor’s benefits after an automobile accident.
What does ‘At-Fault’ mean in automobile insurance?
A determination that an insured party is legally liable for damages or injuries caused by an accident.
What is an Endorsement in an insurance policy?
A legal amendment that modifies the terms of an existing insurance policy.
What is an Extension in an insurance policy?
Optional insurance coverage that increases limits, lowers deductibles, or covers additional perils, especially in provinces with government-mandated basic coverage.
What is an Owned Automobile?
A vehicle registered in the name of the insured.
What is non-owned Automobile Insurance?
Coverage that only pays out when all other similar insurance policies have been exhausted or when a specified threshold is exceeded.
What is Excess Insurance?
Coverage that only pays out when all other similar insurance policies have been exhausted or when a specified threshold is exceeded.
What is Contingent Insurance?
A type of insurance that only gets activated if another primary policy does not provide coverage.
What is a Transportation Network in auto insurance?
A digital platform (e.g. Uber, Lyft) that connects passengers with drivers for compensation.
What is a Surety Bond in auto insurance?
A financial guarantee ensuring that obligations (such as contractual or licensing requirements) will be met.
What are the three levels of jurisdiction in Canada that govern automobile insurance?
- Federal: Governs criminal offenses (e.g. impaired driving, dangerous operation).
- Provincial/Territorial: Regulates auto insurance policies, education, and health services.
- Municipal: Handles local road laws, zoning, parking, and speed limits.
Why is automobile insurance handled at the provincial and territorial level?
Each province or territory manages its own auto insurance regulations, determining requirements for coverage and policy structures.
Why was automobile insurance created?
To protect individuals financially from losses due to vehicle accidents, including property damage, injury-related costs, and legal expenses.
What factors led to the evolution of automobile insurance?
- Mass production of vehicles (making them more accessible).
- Improved highways and infrastructure (leading to higher-speed collisions).
- Increase in lawsuits (as people sought compensation for damages and injuries).
What types of losses does automobile insurance cover?
- First-Party Coverage: Protects the driver and passengers (e.g. accident benefits).
- Third-Party Coverage: Protects others affected by the insured’s vehicle (e.g. liability claims for injury or property damage).
What are the financial risks of not having auto insurance?
- High medical expenses
- Potential lawsuits
- Vehicle repair costs
- Financial ruin from catastrophic accidents.
How did laws requiring mandatory automobile insurance lead to standard auto policy forms?
Provinces created standardized policy wordings (Except in Saskatchewan) to ensure all insurers comply with the same basic policy requirements.
Which provinces have government-run auto insurance programs?
- BC
- Sask
- MB
- QC (Hybrid)
How do government insurance plans work?
They provide basic auto coverage, and private insurers offer additional extension insurance for higher limits or extra features.
What document serves as proof of auto insurance?
A Motor Vehicle Liability Card (commonly called a pink slip).
What is Electronic Proof of Auto Insurance (EPAI)?
A digital version of a motor vehicle liability card, accepted in provinces like ON, AB, NS, NF&L.
Why has the adoption of digital proof of insurance been slow?
- Privacy concerns (Data security).
- Fraud risks (easier to manipulate digital documents).
- Resistance from government insurers (who integrate proof with registration cards).
What are the seven approved Standard Policy Forms (SPFs) in Canada?
- SPF 1: Standard Owners Auto Policy (OAP1 in Ontario).
- SPF 2: Standard Driver’s Auto Policy.
- SPF 4: Standard Garage Auto Policy (Commercial Use).
- SPF 6: Standard Non-Owned Auto Policy.
- SPF 7: Excess Auto Policy (Provides Extra Liability Coverage).
- SPF 8: Lessor’s Contingent Auto Policy.
- SPF 9: Transportation Network Policy (e.g. Uber Coverage).
How do Private Insurers Compete in government Insurance Provinces?
They sell extension insurance, which provides additional benefits beyond the government-mandated basic coverage.
Why is the standardization of automobile policies important in Canada?
It ensures consistent coverage, reduced disputes, and meets regulatory requirements across all provinces.
How does federal and provincial jurisdiction affect automobile insurance policies?
Federal laws govern criminal driving offenses, while provincial laws regulate insurance coverage and claim processes.
If a person moves from one province to another, how does it impact their automobile insurance policy?
The insured must update their policy to comply with the new province’s insurance regulations.
In which situations would an individual require Extension Insurance?
If they want higher liability limits, lower deductibles, or coverage for additional perils like theft or vandalism.
How does proof of insurance differ between private and government-run insurance provinces?
In private insurance provinces, proof comes from insurance companies; in government-run provinces, it’s linked to vehicle registration.
What is Third-Party Liability Coverage?
Insurance that covers the insured’s legal responsibility for injury, death, or property damage caused to others.
What does Third-Party Liability Coverage Pay Form?
- Bodily Injury and Death Claims.
- Property Damage to vehicles, buildings and other structures.
- Legal fees if the insured is sued.
What is Negligence in Automobile Insurance?
The failure to exercise reasonable care, resulting in damage or injury to others.
What is Onus of Proof in liability claims?
The legal responsibility of the plaintiff to provide evidence that another party (the defendant) was negligent.
What is Non-Economic Loss?
Non-economic losses are intangible damages resulting from the accident that must meet the verbal threshold for an insurer to sue.
What are economic losses?
They refer to financial costs that are directly resulting from the accident. Often measurable and objective (e.g. medical expenses for physiotherapy).
What is Absolute Liability in Automobile Insurance?
A legal principle requiring insurers to pay third-party liability claims up to the minimum limit, even if the insured violates policy conditions (e.g. driving impaired).
What is Direct Compensation-Property Damage (DCPD)?
A system where the insured’s own insurer pays for their vehicle damage in accidents where another driver is at fault.
How does DCPD simplify claims handling?
- Eliminates lawsuit for minor vehicle damage.
- Reduces claim processing time.
- Ensures insureds deal only with their own insurer.
What is the Fault Determination Rule?
A set of accident scenarios used by insurers to determine the percentage of fault assigned to each driver.
What happens when both drivers share fault in an accident?
The claim is split based on the assigned fault percentage (e.g. 50/50 which means each insurer’s DCPD will pay the portion they are not at fault).
What are the minimum liability limits required by law?
Varies by province; Ontario requires a minimum of $200,000 (higher limits are recommended – often $1MM).
What are the recommended Third-Party Liability limits?
Most insurers recommend $1 million or $2 million to cover high-cost claims.
Who is covered under Third-Party Liability Coverage?
- The named insured.
- Anyone driving the vehicle with permission.
- Any person legally responsible for the vehicle’s operation.
What are exclusions under Third-Party Liability Coverage?
- No coverage for damage to the insured’s own vehicle (covered under DCPD or Collision coverage).
- Intentional damage caused by the insured.
- Injury or damage resulting from criminal acts (e.g. fleeing police).
- Damage to other property owned or rented by, or in the case, custody, or control of insureds.
- Contamination of property being carried.
- Nuclear Hazards.
- Amounts over the policy limit purchased – other than legal costs and post-judgment interest.
What does Third-Party Liability Coverage provide if the insured is sued?
Pays for legal defense costs and court-awarded damages.
What is the role of the insurer in a liability claim?
- Investigate the claim.
- Determine fault based on the Fault Determination Rules.
- Negotiate a settlement or defend the insured in court.
What is the purpose of DCPD coverage?
Allows insureds to recover vehicle damage costs directly from their own insurer without suing the at-fault driver.
What conditions must be met for a claim to fall under DCPD?
- The accident must occur in a DCPD jurisdiction.
- Involve two or more insured vehicles.
- Be at least partially caused by another insured driver.
What happens if the at-fault driver is uninsured?
The insured can still claim under DCPD and their insurer may seek reimbursement through Uninsured Automobile Coverage.
Does DCPD apply if the accident happens outside Ontario?
Only if both vehicles are from provinces that have signed DCPD agreements, but often that isn’t the case.
What does of vehicle damage are covered under DCPD?
- Vehicle repairs or replacement, based on the insured’s degree of fault.
- Loss of use expenses (e.g. rental car costs).
What additional coverages has the insurer agreed to for third-party liability?
- Reimburse the cost of medical aid necessary at the time/scene of the accident.
- Investigate, negotiate, and settle claims on behalf of insureds.
- Defend insureds and pay the cost of any civil action.
- Be liable up to the minimum limits of the province or territory where the accident occurred.
- Do not use a defense against a claim that is not available in the province or territory where the accident occurred.
- Protect insureds for liability claims against each other, as if a separate policy were issued to each.
What must an insured person do immediately after an accident?
- Report the accident to the insurer in writing within 7 days.
- Provide a written statement if requested.
- Cooperate in the investigation and claims process, helping the insurer obtain all necessary evidence.
- Refrain from assuming liability, settling claims or interfering in the legal proceedings.
What is the specified order of liability for Rental Vehicles?
- Person who rented the automobile.
- The driver of the automobile.
- The owner of the automobile.
Why is Third-Party Liability Coverage important even if DCPD covers vehicle damage?
DCPD only covers property damage; Third-Party Liability is required for injuries, legal defense, and lawsuits.
If a driver rear-ends another vehicle, who is at fault?
The rear driver is typically 100% at fault under FDR and therefore the rear driver would not be able to claim DCPD for vehicle damage (would have to go under collision or all perils).
A driver is involved in an accident in Quebec but is insured in Ontario. How will the claim be handled?
Quebec operates under a no-fault compensation system, meaning Ontario’s policy would apply only to property damage.
How does an insurer determine fault when two drivers give conflicting reports of an accident?
They rely on Fault Determination Rules, police reports, dashcam footage, and witness statements to make a final decision.
What happens if a pedestrian is hit by an insured vehicle?
The pedestrian may file a claim against the driver’s third-party liability coverage if they do not have coverage of their own for injuries and damage.
What are Accident Benefits in automobile insurance?
First-party coverage that provides financial support for medical care, rehabilitation, lost income, and other expenses due to an automobile accident.
Where is Accident Benefits coverage found in an Ontario automobile policy?
Section 4 of the Ontario Automobile Policy (OAP1), governed by the Statutory Accident Benefits Schedule (SABS).
Who qualifies as an ‘insured person’ under Accident Benefits?
- Named insured and listed drivers.
- Spouse and dependents of the named insured.
- Passengers and pedestrians involved in an accident with an insured vehicle.
- Individuals suffering psychological injuries from an accident involving a close relative.
Who pays Accident Benefits when multiple policies exist?
- Own insurer (if named on a policy).
- Insurer of the vehicle occupied at the time of the accident.
- Insurer of any vehicle involved in the accident.
- Motor Vehicle Accident Claims Fund (MVACF).
What is the Minor Injury Guideline (MIG)?
A framework that limits medical benefits for minor injuries to $3,500 to prevent excessive medical claims.
What is the Income Replacement Benefit (IRB)?
Compensates insureds who are unable to work due to accident-related injuries.
Who qualifies for Income Replacement Benefits?
- Actively Employed: People employed at the time of the accident and unable to perform essential job tasks.
- Not Actively Employed: People who worked at least 26 of the last 52 weeks before the accident.
- Contract of Employment: People who had a written job offer before the accident occurred.
How much is paid under Income Replacement Benefit?
80% of net weekly income, up to:
* $400/week (default).
* Optional limits of $600, $800, or $1,000/week if purchased.
* 1 week deductible for the first week of disability. Otherwise paid for 104 weeks (2 years) unless the insured is permanently disabled.
Who Qualifies for the Non-Earner Benefits?
- Not Employed: Do not qualify for an IRB.
- Prior Caregiver: Cease to receive a caregiver benefit because there is no longer a person in need of care.
- Student: Were enrolled in full-time school or completed their schooling within the last 12 months and weren’t yet employed.
What are Non-Earner Benefits?
Benefits for people who do not qualify for IRB but suffer a complete inability to carry on a normal life.
How much do Non-Earner Benefits pay?
Paid at $185/week after 26 weeks, increase to $320/week after 2 years for students. Benefits will be adjusted downward at age 65.
What is the Caregiver Benefit?
Paid if an insured is a full-time caregiver and becomes unable to provide care due to accident-related injuries.
Who qualifies for Caregiver Benefits?
Insureds caring for dependents and suffering a catastrophic impairment due to an accident.
How much does the Caregiver Benefit pay?
$250/week for the first dependent, plus $50/week for each additional dependent. Paid for 104 weeks unless the insured is permanently disabled.
What do Medical, Rehabilitation and Attendant Care Benefits cover?
- Medical Benefits: Pay for all reasonable and necessary medical expenses that aren’t payable under another insurance plan.
- Rehabilitation Benefits: Pays for reasonable measures to reduce or eliminate the effects of any disability resulting from the impairment.
- Attendant Care Benefits: In-home aides or long-term care facility expenses.
What are the limits for Medical, Rehabilitation, and Attendant Care Benefits?
- Non-catastrophic Injuries: $65,000 combined (5-year limit).
- Catastrophic Injuries: $1 million.
- Optional $130,000 or $2 Million limits available for purchase.
What is the Motor Vehicle Accident Claims Fund (MVACF)?
A government-operated fund that provides accident benefits when no private insurance is available.
What are the limits for Medical, Rehabilitation, and Attendant Care Benefits for non-catastrophic injuries?
$65,000 combined (5-year limit)
What are the limits for Medical, Rehabilitation, and Attendant Care Benefits for catastrophic injuries?
$1 million
What optional limits are available for purchase regarding Medical, Rehabilitation, and Attendant Care Benefits?
$130,000 or $2 Million limits
What is the Motor Vehicle Accident Claims Fund (MVACF)?
A government-operated fund that provides accident benefit when no private insurance is available.
Who can claim benefits from the MVACF?
- Uninsured individuals involved in an accident where no insurance is available
- Hit-and-run victims when the at-fault driver is unidentified
- Pedestrians or cyclists struck by an uninsured or unidentified vehicle
Who does not qualify for Accident Benefits?
- Drivers convicted of impaired driving at the time of the accident
- Drivers who knew the vehicle was uninsured
- Excluded drivers under the policy
- People driving without a valid license or without consent
What expenses are covered under Other Accident Benefits?
- Educational Expenses
- Visitor Expenses
- Housekeeping & Home Maintenance
- Damage to clothing, glasses, or hearing aids
- Costs of medical examinations related to claims
How does the Statutory Accident Benefits Schedule (SABS) interact with other benefits plans?
Accident Benefits are first payer, but insurers can offset payments with:
* Social Assistance Benefits
* Collateral Benefits
* Net payments from Income Continuation Plans
* Temporary Disability Benefits Received before the Accident
* Workers’ compensation benefits
Why does Ontario have a separate accident benefits system instead of relying solely on tort law?
To provide faster compensation without requiring injured parties to sue for damages.
What benefits can a student claim if injured in an accident and unable to continue school?
Educational expenses and Non-Earner Benefits if they suffer a serious impairment.
What is the Minor Injury Guideline (MIG)?
It helps to avoid expensive & prolonged assessments and was created to streamline the process.
What is the priority of payment if an insured is injured while riding a bicycle and hit by a vehicle?
- Insured’s own automobile policy
- Insurer of the vehicle in which they were an occupant
- Insurer of any automobile involved in the accident
- MVACF
What happens if an insured person recovers faster than expected after receiving Income Replacement Benefits?
IRB payments stop as soon as they can return to work, based on medical evidence.
What is Uninsured Automobile Coverage?
A mandatory coverage under the Ontario Automobile Policy (OAP1) that protects insured persons in accidents with uninsured or unidentified vehicles.
Who is considered an ‘insured person’ for Uninsured Automobile Coverage?
- The named insured
- Their spouse
- Dependent relatives
- Any passenger in the insured automobile
- A pedestrian hit by an uninsured or unidentified vehicle
What compensation is provided under Uninsured Automobile Coverage?
- Bodily injury or death compensation for insured persons
- Limited property damage compensation
What is the coverage limit for bodily injury or death under Uninsured Automobile coverage?
The minimum third-party liability limit in Ontario: $200,000 and subject to a $300 deductible
What is an Uninsured Motorist?
A driver who operates a vehicle without valid liability insurance at the time of an accident.
What is an Unidentified Motorist?
A driver who cannot be identified, typically in a hit-and-run accident.
What are the requirements for making a claim against an Unidentified Motorist?
- The accident must be reported within 24 hours
- A written statement must be provided within 30 days
- The insured must cooperate with law enforcement
What is required when making a claim for bodily injury or death under Uninsured Automobile Coverage?
- Written notice to the insurer within 30 days
- Detailed proof of injuries and financial losses within 90 days
- Medical examination reports if requested
What is the property damage coverage limit under Uninsured Automobile Coverage?
Maximum $25,000 per accident, subject to a $300 deductible
What are common exclusions under Loss or Damage Coverages?
- Wear and tear
- Mechanical breakdown
- Rust, corrosion
- Damage due to tires alone
- Damage from theft by someone in lawful possession
- Damage from radioactive contamination
What is a deductible?
The amount the insured must pay out-of-pocket before the insurer covers the remaining loss.
How do deductibles impact premiums?
- Higher deductibles = lower premiums
- Lower deductibles = higher premiums
What is a Temporary Substitute Automobile (TSA)?
A rented or borrowed vehicle used while the insured’s vehicle is unavailable due to breakdown, repair, or theft.
What happens if the insured’s vehicle is stolen?
The insurer pays for a rental car or alternative transportation (up to $900) while the stolen vehicle is being recovered or replaced.
What must the insured do immediately after a covered loss?
- Notify the insurer within 7 days
- Take reasonable steps to prevent further damage
- Make no repairs beyond those for protection
What are common fraud schemes involving Loss or Damage claims?
- Vehicular Arson
- Staged accidents
- Phantom Vehicles
What is the purpose of an automobile insurance application?
It gathers essential information for insurers to underwrite, rate, and issue a policy.
Who regulates automobile insurance applications in Ontario?
The Financial Services Regulatory Authority (FSRA).
What happens if a stolen vehicle is recovered after an insurance payout?
The insurer becomes the legal owner unless the insured repays the settlement.
How do government insurance provinces handle applications?
No separate application is required for basic coverage; insurance is provided when the vehicle is registered or the driver’s license is obtained.
What must be done if an insurer issues a policy different from what was applied for?
The insurer must notify the insured in writing about the differences.
What happens if an insured does not object to a policy difference within 7 days?
The policy is deemed accepted.
What happens if an insured misrepresents information on an application?
If a signed application exists, it serves as proof of misrepresentation.
What are the 12 subsections of an automobile insurance application?
- Applicant’s Name
- Policy Period
- Described Automobile
- Driver Information
- Previous Accidents & Claims
- Convictions
- Rating Information
- Coverages Applied For
- Remarks
- Method of Payment
- Declaration of Applicant
- Report of Broker/Agent
What is the difference between the registered owner and the actual owner of a vehicle?
- Registered Owner: The name on the vehicle registration
- Actual Owner: The person who paid for the vehicle
How far back do insurers review accident history?
The application requires 6 years, but some insurers look back further.
What are the eligibility criteria for the Retiree Discount?
- Must be 65+ years old
- Must be retired (no employment income)
- Must be the principal rated driver of the insured vehicle
How does the gender designation ‘X’ impact applications in Ontario?
Ensures fair treatment for trans and non-binary individuals under insurance classification.
What is underwriting in automobile insurance?
The process of evaluating risk and determining eligibility, terms, and pricing for coverage.
What is the difference between Head Office and Individual Underwriting?
- Head Office Underwriting: Establishes marketing philosophy, creates underwriting manuals, uses market trends
- Individual Underwriting: Reviews personal details, assesses hazards, determines final premiums
How do government auto insurers differ from private insurers in underwriting?
They cannot decline risks and must insure all drivers, even high-risk ones.
What are the three main reasons an insurer might reject a risk?
- Class of Business
- Hazard Level
- Substandard Risk
How is the premium calculated for an auto insurance policy?
Formula: Rate x Amount of Insurance = Premium.
What types of electric vehicles exist?
- Hybrid (conventional & plug-in)
- Fully electric models
Why do Electric Vehicles (EVs) have higher premiums?
- Higher repair/replacement costs
- Limited repair facilities
- Expensive battery replacements
What role does the Internet of Things (IoT) play in modern vehicles?
Smart vehicle technology enables remote monitoring, diagnostics, and data transmission.
What are the risk exposures of IoT vehicles?
- Data breaches
- Cyber attacks affecting vehicle control
- Liability shifting to manufacturers for software failures
How might insurance change with the rise of autonomous vehicles?
- Fault responsibility may shift to manufacturers
- Product liability insurance may replace traditional auto policies
What is ratemaking in automobile insurance?
The process of calculating premiums based on statistical data, expected losses, and operating expenses.
What is the main goal of ratemaking?
- Ensure premiums are adequate
- Not excessive
- Not unfairly discriminatory
What is the LAW of Large Numbers?
A statistical principle stating that as the number of policies increases, the predictability of losses improves.
What is the difference between a rate and a premium?
- Rate: The cost per unit of insurance
- Premium: The total amount charged to the insured
What are the three main components of an automobile insurance rate?
- Pure Premium
- Expense Loading
- Profit Margin
What are the key factors that influence automobile insurance rates?
- Driver Characteristics
- Vehicle type & usage
- Territory
- Claims history & Driving Record
- Annual kilometers driven
What are Vehicle Rate Groups?
A classification system that assigns vehicles a numerical rating based on claims data.
What is the Canadian Loss Experience Automobile Rating (CLEAR) system?
A system that classifies vehicles based on historical claims experience rather than MSRP.
What role does the General Insurance Statistical Agency (GISA) play in ratemaking?
GISA collects and analyzes insurance data to help regulators and insurers set fair rates.
What is incurred But Not Reported (IBNR) loss?
Claims that have occurred but have not yet been reported to the insurer.
What is Trending in ratemaking?
The process of forecasting future loss costs based on past trends in claims and inflation.
What is a Rate Board?
A provincial agency that regulates automobile insurance rates to ensure fairness.
What are the four types of rate control used in Canada?
- Prior Approval
- File and Use
- File and Use Following an Adjudication Period
- Prior Setting of Rates by the Board
What provinces have Rate Boards?
- Alberta
- New Brunswick
- Nova Scotia
- Newfoundland & Labrador
- Prince Edward Island
What is Usage-Based Insurance (UBI)?
A system where premiums are based on actual driving behaviour, tracked using telematics.
What is Telematics?
Technology that monitors driving habits such as speed, braking, acceleration, and mileage.
What are the benefits of UBI for insurers and policyholders?
- For Insurers: Better risk assessment, fraud prevention
- For policyholders: More control over rates, potential discounts
What are statutory Conditions in automobile insurance?
Legal requirements that apply to all automobile insurance policies to ensure fairness, transparency, and compliance with regulations.
Where are Statutory Conditions found in Ontario Automobile Policies?
In section 8 of the OAP1 and in the insurance Act.
How many Statutory Conditions are included in an automobile insurance policy?
13 Statutory Conditions govern automobile insurance in Ontario.
What is the insured’s duty regarding material changes in risk?
The insured must notify the insurer immediately if there is a significant change in risk.
What happens if an insured fails to report a material change?
The insurer may deny a claim or void the policy.
What is the rule regarding incorrect premium classification?
If an insurer overcharges due to incorrect classification, they must refund the excess premium with interest.
When is there no coverage under the policy for vehicle use?
If the driver has no valid license or uses the vehicle for illegal activities.
What must an insured do after an accident causing injury or property damage?
- Notify the insurer within 7 days
- Provide all relevant documents
- Not assume liability or settle claims independently
What happens if the insured makes unauthorized repairs before the insurer inspects the vehicle?
The insurer may deny or reduce the claim payout.
How long does the insurer have to decide whether to repair or replace a damaged vehicle?
The insurer must notify the insured within 7 days of receiving the Proof of Loss.
What happens if the insured wants to abandon their vehicle after a total loss?
The insured cannot abandon the vehicle unless the insurer agrees.
How long does the insurer have to pay a claim once the Proof of Loss is submitted?
60 Days from the date of submission.
How can an insurer cancel an automobile policy?
- By giving 15 Days’ notice by registered mail
- 5 days’ notice by hand delivery
What refund does an insured get if they cancel their policy mid-term?
A short-rate refund.
What happens if a registered cancellation notice is returned undelivered?
The insurer has fulfilled its obligation, and the cancellation is still effective.
Who can provide notice or proof of Loss on behalf of the insured?
The insured’s broker, lawyer, family member, or another representative.
What happens if the insured violates certain statutory conditions?
They may still receive some Accident Benefits but could lose other policy coverages.
Why must an insured report material changes in risk to their insurer?
Failing to report changes could lead to claims denials or policy cancellation.
What is the difference between pro-rata and short-rate cancellation refunds?
- Pro-rata: Full refund of unused premium
- Short-rate: Partial refund, with an administrative charge
What happens if the insured violates certain statutory conditions?
They may still receive some Accident Benefits but could lose other policy coverages.
Statutory conditions are specific requirements set forth in insurance policies.
What happens if an insured is caught street racing and causes an accident?
The insurer can deny coverage because racing is a prohibited use under statutory conditions.
What is the difference between pro-rata and short-rate cancellation refunds?
Pro-rata: Full refund of unused premium (if the insurer cancels).
Short-rate: Partial refund, with an administrative charge (if the insured cancels).
If an insured makes repairs before notifying the insurer, how might it affect their claim?
The insurer may reduce or deny payment since they were not given the opportunity to inspect the damage.
Why is there a 7-day reporting requirement for accidents and losses?
To prevent fraudulent claims and allow the insurer to investigate the accident properly.
What are General Provisions in an automobile insurance policy?
Legal terms that outline rights, responsibilities, and limitations for both the insurer and the insured.
Where are General Provisions found in the OAP1?
In Section 1 and 2 of the OAP1.
What is the purpose of General Provisions?
To define:
* Who is covered under the policy
* Where the policy applies
* Exclusions and limitations of coverage.
What are the coverage territories under an Ontario auto policy?
The policy provides coverage when the automobile is used, operated, stored, or parked in:
* Canada
* United States
* Any jurisdiction designated in the Statutory Accident Benefits Schedule (SABS)
* On a vessel traveling between ports of these countries.
Is coverage provided outside North America?
No, the OAP1 does not cover vehicles outside of Canada and the US.
What is an ‘Insured Person’ under an auto policy?
The named insured, spouse, dependents, and listed drivers.
What is an ‘Automobile’ as defined in an insurance policy?
A private passenger vehicle, motorcycle, or light truck used for personal transportation.
What is a ‘Described Automobile’?
The specific vehicle listed on the insurance policy.
What is a ‘Newly Acquired Automobile (NAA)?
A vehicle newly purchased or leased by the insured that is not covered by any other insurance.
What is a ‘Temporary Substitute Automobile (TSA)’ and when is it covered?
A rental or borrowed vehicle used while the insured’s car is being repaired or replaced. Cannot be owned by the insured or a household member.
What is a ‘non-owned automobile’?
A vehicle that is insured does not own but is borrowed or rented.
What type of risks are excluded from automobile policies?
- Intentional damage caused by the insured
- Carrying explosives or radioactive materials
- Commercial use as a taxi, bus, or rideshare (unless endorsed)
- Damage from criminal acts (e.g. using a stolen vehicle).
How can ridesharing and delivery driving be covered under a policy?
The insured must purchase an endorsement (e.g. OPCF 6A for ridesharing).
What happens if an automobile is used without the owner’s consent?
There is no coverage except for limited accident benefits (MRA).
What happens if an excluded driver operates the insured vehicle?
No coverage applies for that driver, except for limited accident benefits.
Can an insurer inspect an insured automobile?
Yes, at any reasonable time.
What happens if an insured refuses an inspection?
The insurer may cancel Section 7 (Loss or Damage Coverage) and deny claims under that section.
How does the OAP1 handle ridesharing and carsharing?
Standard policies exclude commercial vehicle use unless an endorsement is added.
What is the difference between ridesharing and carsharing?
- Ridesharing: A passenger travels in a private vehicle for a fee (e.g. Uber, Lyft)
- Carsharing: A vehicle owner rents their car to another person (e.g. Turo).
When does standard auto insurance become invalid for ridesharing?
Coverage is void during the three ridesharing periods:
* App is on, but no ride is accepted
* Ride is accepted, and the driver is en route to pick up the passengers
* Passenger is in the vehicle until drop-off.
How can an insured get coverage for ridesharing?
By purchasing OPCF 6A (Permission to Carry Paying Passengers for Compensation).
How can the insured terminate their policy?
By providing written notice to the insurer.
How can the insurer terminate the policy?
- 15 days; notice by registered mail (30 days if for non-payment)
- 5 days notice if hand-delivered.
What refund does an insured receive if they cancel mid-term?
A short-rate refund, meaning the insurer keeps a portion of the premium.
What refund does the insured get if the insurer cancels the policy?
A pro-rata refund, meaning the insurer returns the full unearned premium.
Why is the definition of ‘insured person’ important in determining coverage?
It establishes who is eligible for benefits and liability coverage under the policy.
If an insured driver moves from Ontario to another province, how does it affect their policy?
They must update their insurance to comply with the new province’s laws.
Why are exclusions such as carrying hazardous materials necessary in auto policies?
These activities pose a higher risk and may require specialized insurance.
If a driver borrows a friend’s uninsured car and gets into an accident, does their policy cover it?
No, Non-Owned Automobile Coverage only applies if the borrowed vehicle is insured.
Why do insurance policies limit coverage to Canada and the U.S.?
Because legal and regulatory differences make it difficult to provide coverage beyond these jurisdictions.
What is an automobile insurance endorsement?
An amendment to a policy that changes its terms and conditions.
How do endorsements affect the standard auto insurance policy?
They can broaden, restrict, or alter coverage based on specific needs.
What are Ontario automobile insurance endorsements called?
Ontario Policy Change Forms (OPCFs).
What are endorsements called in other provinces?
- Standard Endorsement Forms (SEFs) in most provinces
- Quebec Endorsement Forms (QEFs) in Quebec.
Who must approve endorsements in Ontario?
The office of the Superintendent of Financial Institutions (OSFI).
What types of changes might require an endorsement?
- Storing a vehicle
- Changing a vehicle’s value
- Adding coverage for underinsured motorists
- Extending loss of use coverage
- Adding liability for non-owned vehicles
- Protecting financial interests, such as lienholders.
What must happen when an endorsement restricts or reduces coverage?
The insured must sign to acknowledge the change.
What is OPCF 6A – Permission to Carry Paying Passengers?
Allows a private vehicle to be used for ridesharing or carrying passengers for compensation.
What is OPCF 5 - Rented or Leased Vehicles?
Extends coverage to leased vehicles where the leasing company is the owner.
What is OPCF 23A – Lienholder Protection?
Ensures that a lienholder (such as a bank or leasing company) is compensated first in a loss.
What is OPCF 27 – Liability for Damages to Non-Owned Vehicles?
Extends an insured’s own liability and physical damage coverage to rental cars.
What is OPCF 28A – Excluded Driver Endorsement?
Removes coverage for a specifically named driver (e.g. a high-risk household member).
What is OPCF 13C – Limited Glass Coverage?
Removes or limits coverage for glass damage to reduce premiums.
What is OPCF 16 – Suspension of Coverage?
Temporarily suspends all coverage when a vehicle is not in use.
What is OPCF 17 – Reinstatement of Coverage?
Restores coverage after an OPCF 16 suspension when the insured starts using the vehicle again.
What is OPCF 28 – Reducing Coverage for Named Drivers?
Removes specific coverages, such as collision or accident benefits, for a named driver.
What is OPCF 20 – Loss of Use Endorsement?
Pays for a rental car or transportation costs while the insured vehicle is being repaired.
What is OPCF 43 – Removing Depreciation Deduction?
Ensures that in a total loss, the insured receives the full purchase price of the vehicle, without depreciation.
What is OPCF 44R – Family Protection Endorsement?
Protects insured persons when the at-fault driver is uninsured or underinsured by covering the difference up to the insured’s third-party liability limits.
What is OPCF 19 – Limiting the Amount Paid for Loss or Damage?
Sets a maximum payout for vehicle damage, which may be lower than the market value.
What is OPCF 32 – Recreational Vehicles Endorsement?
Extends coverage to motorhomes, snowmobiles, and ATVs.
What is OPCF 40 – Fire Deductible Endorsement?
Requires the insured to pay a deductible for fire claims, which would otherwise be waived.
What is the purpose of the OAP #2 – Driver’s Automobile Policy?
Provides liability coverage when a person regularly drives a vehicle they do not own.
Why is OAP #2 considered rare?
Most people either own their own vehicle or drive a company vehicle that is already insured.
What coverage does OAP #2 provide?
Third-party liability coverage.
Why might an insured add OPCF 27 instead of purchasing rental car insurance?
OPCF 27 extends liability and physical damage coverage to rental cars, avoiding costly rental insurance.
How does OPCF 44R benefit an insured in the event of a severe accident?
If the at-fault driver has insufficient liability insurance, OPCF 44R covers remaining amount up to the insured’s own policy limits.
Why would an insured purchase OPCF 43 – Removing Depreciation Deduction?
To receive the full original purchase price for a new vehicle instead of a depreciated settlement in the event of a total loss.
If an insured has OPCF 17 – Suspension of Coverage, what must they do before driving the vehicle again?
They must reinstate coverage using OPCF 17 before legally operating the vehicle.
What would happen if a high-risk driver in a household is excluded using OPCF 28A but then drives the insured vehicle?
There would be no coverage at all, even if the excluded driver causes a major accident.
What is the Insurance Companies Act, and how does it impact automobile insurance?
A federal law that governs the licensing, supervision, and solvency standards for insurers in Canada.
How do Provincial and Territorial Insurance Acts regulate automobile insurance?
Each province and territory has its own Insurance Act, which licenses insurers, brokers, agents, and adjusters.
What role does the Highway Traffic Act (HTA) or equivalent play in auto insurance?
Regulates licensing of drivers and vehicles, as well as traffic laws that impact insurance claims.
What are insurance regulations, and why are they important?
Regulations provide details that support and clarify insurance laws.
What is the Financial Services Regulatory Authority (FSRA), and what is its role?
FSRA oversees auto insurance regulation in Ontario and ensures consumer protection.
What are FSRA’s main objectives?
- Promote high standards of business conduct
- Ensure fair and competitive insurance markets
- Monitor unfair or deceptive practices.
What industries does FSRA regulate?
- Property & casualty insurance
- Life and Health insurance
- Credit unions, mortgage brokers, pension plans.
What powers does FSRA have to protect consumers?
- Investigate insurers suspected of unfair or deceptive practices
- Require insurers to respond fully and promptly to inquiries
- Penalize brokers and insurers who fail to meet compliance standards.
What are examples of unfair or deceptive insurance practices?
- Misrepresenting policy terms or coverage
- Offering inducements (e.g. gifts or money) to secure business
- Discriminating unfairly based on risk classification.
What is the role of the Registered Insurance Brokers of Ontario (RIBO) in consumer protection?
Licenses and self-regulates insurance brokers in Ontario.
What penalties can RIBO impose on brokers for misconduct?
- Fines
- License suspension
- Revocation for using misleading advertising.
What authority does FSRA have over policy cancellations and non-renewals?
FSRA ensures insurers provide written notice to the insured before cancellation.
What notice must an insurer give before canceling or non-renewing a policy?
30 days notice in writing to the Named Insured.
Can an insurer refuse to issue a policy to any applicant?
No, insurers must follow FSRA-filed declination rules and cannot discriminate unfairly.
What is the Facility Association, and why was it created?
A risk-sharing mechanism ensuring that all drivers have access to insurance, even if rejected in the voluntary market.
How does the Facility Association operate?
All private insurers must participate; high-risk policies are assigned to servicing carriers.
In which provinces does the Facility Association operate?
All provinces except BC, SK, and MB, which have government-run insurance.
What are servicing and non-servicing carriers in the Facility Association?
- Servicing carriers: issue policies and manage claims
- Non-servicing carriers: share financial results but do not issue policies.
What is a Risk Sharing Pool (RSP), and how does it work?
A mechanism where insurers transfer high-risk policies into a pool while retaining a share of premiums and claims.
What are the Risk Sharing Pools in New Brunswick and Nova Scotia?
- New Brunswick: First Chance RSP for newly licensed drivers
- Nova Scotia: Inexperienced Driver RSP for drivers with fewer than 6 days of experience.
What is the Quebec Risk Sharing Plan (QRSP)?
A mechanism where the insurers in Quebec share high-risk policies to ensure availability of coverage.
Who administers the Quebec Risk Sharing Plan?
The Groupement des Assureurs Automobile (GAA).
How do insurers participate in the QRSP?
Insurers transfer high-risk policies to the pool, and profits/losses are shared proportionally.
Why is the Facility Association necessary in provinces with private auto insurance?
To ensure that high-risk drivers still have access to insurance.
How does FSRA protect consumers from unfair insurance practices?
By investigating complaints, enforcing penalties, and requiring fair business practices.
If an insured is denied coverage by an insurer, what options do they have?
They can seek insurance through another insurer, the Facility Association, or a Risk Sharing Pool.
Why must an insurer provide notice before canceling a policy?
To ensure the insured has time to secure alternative coverage and avoid a lapse in insurance.
What happens if an insurer unfairly denies coverage to an applicant?
FSRA can investigate and penalize the insurer for violating fair business practices.
What options does an insured have if denied coverage by an insurer?
They can seek insurance through another insurer, the Facility Association, or a Risk Sharing Pool.
What are the three types of automobile insurance systems in Canada?
- Private insurance system (e.g. Ontario, Alberta)
- Government-run public insurance system (e.g. BC, SK, MB)
- Hybrid System (e.g. Quebec)
Which provinces have private auto insurance systems?
- Ontario
- Alberta
- New Brunswick
- Nova Scotia
- Prince Edward Island
- Newfoundland & Labrador
Which provinces have government-run insurance systems?
- British Columbia (ICBC)
- Saskatchewan (SGI)
- Manitoba (MPI)
What is Quebec’s hybrid system?
Quebec’s public system covers bodily injury claims (no-fault), while private insurers handle property damage claims.
Who regulates auto insurance in private insurance provinces?
Each province’s financial regulator (e.g. FSRA in Ontario, AIRB in Alberta).
What is a key advantage of public insurance systems?
Standardized pricing and guaranteed access to coverage for all drivers.
What is a disadvantage of public insurance systems?
Less competition, which can result in less innovation and fewer coverage options.
What is a key advantage of private insurance systems?
Competition between insurers helps control pricing and improve service.
What is a disadvantage of private insurance systems?
Higher premiums for high-risk drivers and the possibility of being denied coverage.
How does the Facility Association help high-risk drivers in private insurance provinces?
It ensures that all drivers have access to coverage, even if they are rejected in the regular market.
What is the role of the Insurance Corporation of British Columbia (ICBC)?
ICBC provides basic mandatory auto insurance and offers optional coverage through its own policies or private insurers.
What is Saskatchewan Government Insurance (SGI) and how does it operate?
SGI provides mandatory coverage and allows policyholders to choose between no-fault and tort-based insurance for bodily injury claims.
What is Manitoba Public Insurance (MPI)?
The government-run insurer that provides no-fault personal injury coverage and mandatory property damage coverage.
Can drivers in BC, Saskatchewan, or Manitoba purchase private insurance?
Yes, but only for optional coverages like collision and comprehensive.
How does the public insurance system handle rate-setting?
Rates are determined based on actuarial analysis and must be approved by government agencies.
What is a no-fault insurance system?
A system where each driver’s own insurer pays for their damages and injuries, regardless of fault.
What are the benefits of a no-fault system?
Limited ability to sue for pain and suffering.
What are the downsides of a no-fault system?
Limited ability to sue for pain and suffering.
What is a tort-based insurance system?
A system where the at-fault driver’s insurance pays for damages and injuries.
Which provinces have full no-fault systems?
- Quebec
- Manitoba
- Saskatchewan (unless tort option is chosen)
How does Quebec’s hybrid system work?
The public system (SAAQ) covers bodily injuries, while private insurers handle property damage claims.
Who administers bodily injury claims in Quebec?
The Societe de l’Assurance Automobile du Quebec (SAAQ).
How are property damage claims handled in Quebec?
Private insurers provide coverage for vehicle damage and liability.
Can Quebec residents sue for pain and suffering after an accident?
No, bodily injury claims are handled solely through the no-fault system.
How does Quebec’s system affect insurance costs?
Quebec has one of the lowest insurance costs in Canada due to its public no-fault bodily injury system.
What is the Canadian Inter-Provincial Agreement on Insurance?
An agreement ensuring that insurance coverage is recognized across provinces.
How does out-of province coverage work?
Auto insurance automatically adjusts to meet the minimum requirements of the province where an accident occurs.
Can a driver purchase insurance in another province?
No, drivers purchase insurance in their home province.
What happens if an Ontario driver gets into an accident in Quebec?
Their Ontario policy applies for property damage, but Quebec’s no-fault system handles bodily injury.
How do insurers handle cross-border claims in Canada and the U.S.?
Policies provide coverage in the U.S. but limits adjust to meet the minimum requirements of the state where the accident occurs.
Why does Quebec have lower auto insurance costs than Ontario?
Because bodily injury claims are covered by the public system, reducing legal and administrative costs.
If a driver in Manitoba wants to sue an at-fault driver for pain and suffering, what must they do?
They must have opted for tort-based insurance, as the default MPI coverage is no-fault.
How does the Facility Association ensure fair access to insurance in private insurance provinces?
It pools high-risk drivers across insurers, so no single insurer bears the entire risk.
Why do auto insurance rates in BC fluctuate based on ICBC’s financial performance?
Because ICBC is a government-run insurer, and its rates depend on claim payouts, operating costs, and investment returns.
If a driver from Ontario moves to Alberta, what must they do regarding auto insurance?
They must purchase a new policy from an Alberta-licensed insurer because auto insurance is regulated at the provincial level.
