Auto insurance reform: big changes for Ontario policyholders

More than 11 million licenced Ontario drivers will soon be hit with major changes in their auto insurance policies, including new modular accident benefits, when long awaited reforms take effect on July 1, 2026.

Auto insurance reform in Ontario will give drivers more choice and flexibility when renewing or purchasing a policy, says Lilian Kim, a Toronto-based senior media relations officer with the Financial Services Regulatory Authority of Ontario (FSRA).

“Drivers will be able to select certain accident benefits to better fit their needs and circumstances. Medical, rehabilitation and attendant care benefits will remain mandatory to ensure everyone has access to essential recovery supports after a collision. All other accident benefits, such as income replacement, caregiver benefits, and funeral benefits will become optional,” she explains.

“These reforms move away from a one-size-fits-all approach,” Kim adds.

The Ontario government’s changes to auto insurance will “empower Ontario drivers with options in their auto insurance policies,” says Brett Weltman, manager of media relations with the Insurance Bureau of Canada (IBC) in Toronto.

Each policyholder will need to make the decisions that are right for them. It is, therefore “important that consumers spend more time this renewal season talking with their insurance representative about how auto insurance is changing,” Weltman stresses.

Duncan Meadows, a partner with EY Consulting in Toronto, says another major change presented by auto insurance reform in Ontario is that the auto insurer will become the first payer for medical expenses following an accident, versus claiming through a private health plan.

The impact of auto insurance carriers being the first payer will, over the longer term, place more financial strain on carriers, says Meadows. “Auto insurance is actually a very low margin business. And so ultimately that may end up being an inflationary pressure on the price of auto insurance for drivers in Ontario,” he warns.

Premium savings bring potential risks

Kim says some policyholders in Ontario already have certain coverages through employer benefits or private insurance plans. With this change, they will no longer need to pay for benefits they may already have elsewhere.

For example, says Colin Simpson, chief executive officer of the Insurance Brokers Association of Ontario (IBAO) in Toronto, there may be circumstances where a policyholder already has income replacement coverage through their employer, outside of their auto insurance.

Auto reform still allows drivers to purchase additional optional benefits for enhanced protection, says Kim.

Meadows notes that some of the most significant optional benefits that policyholders will have to choose whether to select will be income replacement, non-earner benefits, housekeeping benefits, and death and funeral benefits.

Brokers need to be able to explain to consumers not just their options by adding or taking off various coverages available, says Simpson, but also the potential impact of what not having coverage for certain options could mean to them.

Meadows envisages a risk whereby lower income drivers that are particularly price sensitive, “may choose to remove coverages, which for relatively small premium savings may save them a few bucks a year. But if they get into an accident, they may ultimately really need that income replacement.

“I think [it is] most important that more vulnerable customers really understand that while saving $50 or $100 might seem appealing this year, if you were to get into an accident [and] lost employment for a period of time, what would that mean for you and your family. And is that worth taking a relatively small premium reduction to take that risk?” he stresses.

FSRA expects insurers, agents and brokers to clearly communicate the changes under auto reform to customers well in advance of July 1, says Kim. When quoting new business or renewing policies, insurers, agents and brokers are expected to clearly identify which coverages are optional, be able to explain that to them in plain language, and also ensure the premium for each optional coverage is clearly shown, she elaborates.

“Consumers should also be supported in making reasonable, needs-based choices that best suit their individual profile, including their income, household responsibilities, and any other coverage they may already have,” she adds.

Insurer, broker obligations

Auto reform requires insurance carriers to make certain operational and tactical changes to their systems, says Meadows.

They must also provide the requisite training for staff to be able to handle the additional optional coverages available to clients, and for being first payer. Companies are already starting to make these changes, and bearing those costs, so they will be ready to implement them when the reform takes effect, he adds.

“They’ll have to determine how they present these options to policyholders,” says Meadows. If clients purchase policies through a broker, insurers need to make certain that brokers understand the packages available, including the different coverages, the premiums and potential benefits, as well as the potential risk trade-offs involved with selecting or not selecting various options such as income replacement, to the prospective client.

“I think technology will play a role in that,” says Meadows, who notes that having the right technology in place can help ensure that insurance companies and brokers deliver the correct guidance about the various policies and options available.

“The onus will be on brokers and carriers to explain the options in a fair and transparent way, and it [comes] down to the consumer to ultimately make the decision around what's right for them. So there's also a level of consumer responsibility here,” says Meadows.

Kim says that while insurance industry processes will continue to focus on the timely and fair handling of claims, the benefits available after an accident will depend more directly on the coverage selected under the policy.

This reinforces the importance of clear communication at the point of sale and renewal. Insurers and brokers are also expected to prepare operationally and technologically for changes under auto reform to ensure a smooth transition for consumers, she adds. 

“As you add choice and complexity into any insurance product, it's a huge opportunity for brokers to shine their value proposition, because consumers need advice,” says Simpson.

Weltman says the Ontario government directed FSRA to lead implementation of the auto insurance reforms, and that IBC and the industry have been working closely with FSRA on implementation.

“The entire industry has been getting ready. Broker/agent education modules were launched at the end of January [2026] to ensure that all brokers and agents are ready and prepared for July 1,” says Weltman.

IBC and IBAO will also be launching a consumer education campaign in April that will feature social, digital and radio ads encouraging consumers to learn more about the auto insurance reforms, he says.