Winter Tire Discount 101

This October, the Ministry of Finance issued a statement confirming all insurance companies including the Facility Association are required to provide a winter tire discount as of January 1, 2016. This was mandated by the Ontario Government in 2014 as part of their commitment to reduce insurance premiums.

You and your clients might have questions on implementation and things like how much money will be discounted. Take this opportunity to connect and help clarify some of the uncertainty that might arise surrounding the new initiative.

Are all discount amounts the same? The actual discount is up to the insurance company, but regulators approve them – we’ve seen ranges from 2% to 5%. Some insurers will offer the discount only at certain times throughout the year. Each insurer is different so if there’s ambiguity within your office, reach out to your insurance markets for clarification.

What is your role as a broker to police your clients’ use/installation of winter tires? While each company has communicated different requirements, it appears most companies are taking an honour system approach. Just like any other discount brokers verify, let documentation and data integrity be your guiding principal. While there’s no indication insurers are looking to micromanage their brokers’ documentation practices, we suggest you gather proof of winter tire installation up front so you’re protected in the instance of a claim dispute. Proof of winter tire installation could include:

* A picture of winter tires on the vehicle * A purchase receipt for the tires * A purchase receipt for installation * Documentation validating verbal confirmation from your clients that they have winter tires on their vehicle

Is there E&O exposure if your client says they have winter tires, but don’t? Under the statutory conditions, an insurance company could void your client’s policy for misrepresentation, but they’d more likely re-rate the policy and chargeback the additional premium to the consumer.

Do brokers need to ask clients about winter tires every year, or is it a one-time thing? While communication isn’t mandated, it’s good practice to connect with clients multiple times throughout the year. This is a great opportunity to do so.

Is a mass mailing to clients required? Winter tires are not mandated (the discount is optional) so there’s no required communication you must send. The initiative is designed to incent consumers to use winter tires and improve road safety during winter months. But as mentioned above, this is a great opportunity to touch base with clients and highlight safety and cost-saving measures.

The media references a 5% discount, which isn’t true for all Ontarians. How can you manage your clients’ expectations? Suggested messaging includes:

* Not everyone is guaranteed to see a 5% discount. * Despite what’s been said in the media, the winter tire discount ranges from 2% – 5%; this percentage depends on the company you’re insured by. * The winter tire discount was added to incent drivers to install winter tires and improve road safety in winter months; we look forward to a winter with reduced collisions, both in frequency and severity.