Will Ontario auto policy sales move to car dealerships?

Auto insurance sales, in some form, could be coming to Ontario car dealerships under a plan outlined in the province’s 2024 budget.

It would let the Financial Services Regulatory Authority (FSRA) use its Test and Learn Environment (TLE) function to develop pilots “to support the creation of more innovative automobile insurance products and services with the goal to improve customer experience and affordability.”

What that would do, Stuart Carruthers, a partner at Stikeman Elliott LLP told a regulatory segment at the Insurance Bureau of Canada (IBC) InSight Summit 2025, is “…empower FSRA to launch a pilot to allow auto dealers to sell auto insurance in their dealerships on the sales floor, either traditional auto insurance or embedded insurance products that are sold as part of the vehicle bundle.”

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If Ontario’s regulatory amendment is approved, the provincial regulatory documents read, “the amendment would empower the FSRA CEO to exempt the applicability of section 231 for the purpose of enabling the sale of automobile insurance at motor vehicle dealerships under FSRA’s TLE.” It adds that, “Currently, section 231 of the Insurance Act restricts motor vehicle dealers from engaging in matters relating to the sale of automobile insurance.”

While Carruthers said auto dealers are currently able to offer some ancillary auto insurance products like extended warranties, the change would bring in “traditional auto insurance, and FSRA would utilize its test and learn [environment]…to create a regime to allow dealers to sell.” There are further details in a November 2024 blog post he wrote while the comment period for the regulatory proposal was still open. It has since closed.

“That would be a huge change in the landscape in Ontario,” he told the IBC summit. “Picture smaller centres or rural Ontario, where the big pillars of the local community are the big insurance broker and the one or two big car dealers – and now all the auto insurance could be bought at the car dealers without going to the interest the insurance broker.”

No tests so far

So far, according to several sources Canadian Underwriter spoke with, no dealership insurance sales pilot programs stemming from the TLE proposal are operating.

However, there are existing models whereby Ontario brokers can get referrals from certain auto dealerships, and certain auto makers (specifically newer companies like Tesla) sell auto insurance products designed to cover their brands’ unique features, says Insurance Brokers Association of Ontario (IBAO) CEO Colin Simpson. 

“The real question is, what is the motivation of the change in the regulation?” he tells CU. “We are supportive of anything that looks at innovation in our industry to move things forward, certainly from a consumer perspective. The challenge is, are consumers adequately protected?”

Importantly, Simpson emphasizes, “if you look at…the actual regulations, [this] could create a pilot project within the TLE to facilitate auto insurance products to be sold at motor vehicle dealers, not by motor vehicle dealers.”

He notes IBAO’s comments to the province heavily emphasized anybody selling insurance products must be licensed to do so, as is the case today.

“There’s all sorts of models that can be generated. You could have a brokerage inside a dealership. You could just have one connected. There’s different ways you can do that and still operate within current expectations on how the market operates. And that is our concern, as long as a level playing field [is preserved] for everybody.”

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What’s interesting, Simpson adds, is that Ontario’s regulatory proposal comes just as both British Columbia and Quebec are moving away from certain sales models involving auto dealerships.

“The issues that these two other provinces are finding is that the motivation of the sellers, the motor groups, [is] to generate margin and profit,” he tells CU. “They’re not necessarily looking at the consumer’s interest. A broker doesn’t sell [an insurance] product to make a margin. It sells it to match against the consumer’s risk profile, their needs. So, it’s kind of ironic that two provinces are moving away from this [and] Ontario seems to be considering it.”