BU353 Lecture Notes - Lecture 11: Liability Insurance
Chapter 11: Automobile Insurance
In four provinces (Quebec, Manitoba, Saskatchewan and Ontario), compensation for losses arising from
auto accidents is provided by no-fault insurance. In Manitoba and Quebec, where there is pure no-fault
insurance, drivers cannot sue for bodily injury losses; instead, the government insurer provides
generous injury benefits to affected parties. Ontario has a partial no-fault system where the insurer
pays for relatively small losses, but the injured party can sue the at-fault party for losses above a certain
amount.
Standard auto policy coverages
(1) coverage for liability to third parties harmed by the negligence of an insured person
(2) accident benefits or personal injury protection coverage for death benefits, medical expenses, loss of
income and uninsured motorist coverage
(3) optional coverage for physical damage to and theft of insured autos
See Table 11.1 for different types of automobile loss exposures and insurance for losses.
The Absolute Liability Law gives third parties a direct right of action against the insurer to have the
insurance money under the policy paid directly to them.
Personal auto insurers generally use rate classification systems that reflect driver characteristics such as
years of driving, whether the car is driven to work or for business, driving record, and the geographic
territory in which the auto is located. Rates are lower for insurers with more stringent underwriting
criteria.
All provinces/territories have made auto liability insurance compulsory. These have been criticized for
weak enforcement in some jurisdictions, and for having a regressive impact on the distribution of
income.
The residual insurance market exists to serve drivers with characteristics that suggest significantly
above-average expected claim and/or administrative costs.
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Document Summary
In four provinces (quebec, manitoba, saskatchewan and ontario), compensation for losses arising from auto accidents is provided by no-fault insurance. In manitoba and quebec, where there is pure no-fault insurance, drivers cannot sue for bodily injury losses; instead, the government insurer provides generous injury benefits to affected parties. Ontario has a partial no-fault system where the insurer pays for relatively small losses, but the injured party can sue the at-fault party for losses above a certain amount. See table 11. 1 for different types of automobile loss exposures and insurance for losses. The absolute liability law gives third parties a direct right of action against the insurer to have the insurance money under the policy paid directly to them. Personal auto insurers generally use rate classification systems that reflect driver characteristics such as years of driving, whether the car is driven to work or for business, driving record, and the geographic territory in which the auto is located.
