Will online auto insurance sales replace brokers? A look at the risks

Ontario auto dealers are welcoming a two-year, test-and-learn regulatory initiative that will enable them to sell embedded car insurance at the point of sale, so long as the sales are conducted by a licensed insurance professional.

But while online auto dealers see this as a way to simplify, automate and ‘demystify’ the broker’s role in online car insurance, the province’s brokers warn this is happening at a time when the province is poised to introduce more ‘optionality’ – and hence, more complexity — into the sale of auto insurance next year.

“It’s just complex, and we have to figure out how to make [the car purchase process] easier for consumers,” Insurance Brokers Association of Ontario president and CEO Colin Simpson said at a National Insurance Conference of Canada panel discussion in Gatineau, Que., last Thursday.

“I think the real issue is that, because it’s a complex product, there are a lot of consumer protections we have to be mindful of, and that is why we have a licensed professional selling the product. And we need to make sure consumers are getting the right advice at the right time to make the right decisions….

“As we’ll see in July next year, it’s going to get even more complicated with more choices, with more advice required from licensed professionals to advise on the product. So it’s not going to get any easier.”

Buying cars online

When thinking of offering car insurance at the point of sale, some may envision a licensed insurance provider at a car dealership going over auto insurance with a consumer. At the same time, the customer may be waiting for the dealership’s finance person to obtain a credit check to confirm the car payments.

But we’re in the artificial intelligence world now. Online car retailers are looking for ways to embed the broker’s role in a seamless, one-stop-shop online consumer experience.

“As an online used car retailer, we see how fragmented the car buying process is for customers every day,” said Maggie Mo, vice president of finance at Clutch, a Canadian online platform for buying, selling, and financing used cars. Clutch offers a 100% online process with no physical dealerships, providing home delivery for purchases and pick-ups for sales.

“Not only do they have to go through the rigmarole of car selection, the credit application process for their auto loan, looking at extended warranty or ancillary product choices, they also send them off to an insurer or broker to get auto insurance.

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“So, at Clutch, most of that car buying process is purely online and the customer can go through that entire process without any really human intervention. The only part where the customer has to leave that online checkout process is at the insurance stage.

“So, we say to the customer, ‘Okay, great, you’ve chosen your car, you’ve got your [financing] application. It’s been approved by whatever lender that you’re approved for. Now, go off on your own to find auto insurance and come back to us when you have the pink slip, then you can schedule your delivery [of] the car straight to your house.’

“So at that point, the consumer goes off. They have to get educated about what insurance they want, which insurer to go with, which broker to go with….And that whole process takes three, four, or five days. They come back to us with the insurance slip….

“So at the end of the day, the whole process is a bit fragmented for the customer.”

Mo talked about using AI to mimic a broker’s ‘decision-making matrix’ to simplify auto insurance options for consumers, so that the insurance advice could be seamlessly worked back into the online sales process.

“We’d like to demystify the insurance portion of the purchase,” she said. “In a broker’s mind, once the consumer tells them their risk profile, the risk criteria, that broker has some sort of decision matrix in their head to choose what [auto insurance to buy]. Like, ‘In my universe of insurers that I’m partnered with, which [is] the right product?’

“I’d love to be able to serve that decision matrix up on a screen, which, at the same time, educates the consumer on why this product is good for them, what things in regulatory system affect their premium [and] leads them to the right choice?”

Can car insurance advice be automated?

But insurance brokers across the country have been working for decades on how to ensure broker advice is not bypassed in an automated system.

“It’s not as black and white as your picture,” Simpson replied to Mo.  

Even something as simple as cancelling an existing insurance policy to move to a different carrier can have financial consequences for the consumer, Simpson said. That’s why it’s not easy to ‘simplify’ or automate the broker’s role in the embedded, online insurance purchase.

“I think there are things we need to look at as an industry, but also together [with the car dealers], to make things more streamlined, for sure,” Simpson said. “We just have to be very careful [that for] the choices consumers have to make, they need to have the information.”

Simpson gave the real-world example of someone purchasing a car at a dealership, which then referred the consumer to a direct writer of auto insurance. The consumer purchased a new policy from the direct writer and then went to their broker to cancel their existing policy — only to find out it was going to cost them money to cancel it.

He noted admin fees for insurers to cancel insurance policies can range between zero and between $200 and $300.

“Here in Ontario, you can get a short charge on your policy as you cancel it, which costs you a lot of money. It depends on which insurance company you are with, and the timing of when you cancel it. Unless you give that information to the consumer, they don’t know whether they’re making the right choice. They could be losing money by buying something on the spot.”

Looming optionality

Simpson reiterated insurance policy sales are about to get more complicated next year. On July 1, 2026, Ontario is making all auto accident benefits coverage optional, except for medical rehabilitation and attendant care benefits.

“This means that consumers will need to opt-in and pay extra if they want to have coverage for lost wages, non-earner benefits, housekeeping expenses, caregiver expenses, educational expenses, visitor expenses, expenses for damage to personal items, death benefits and funeral benefits,” as Nelligan Law points out on its website.

This “à la carte” way of purchasing auto insurance benefits is designed to keep insurance premiums down, since consumers pay only for the benefits they think they will need.

Brokers have been actively discussing E&O exposure arising from making formerly mandatory benefits optional. That’s because consumers may potentially sue brokers if they find out they need insurance that they initially opted not to purchase. In that instance, consumers may argue brokers should have better explained their options.

In this context, brokers are concerned about narrowing consumers’ expanding options for the sake of simplifying an online car purchase.  

If the auto insurance portion of a car sale is the most complicated part of the process, maybe the embedded auto insurance sales model should be turned on its head, Simpson suggested at the NICC discussion, tongue in cheek.

“So maybe the insurance becomes the driver for the [consumer’s] decision [to purchase a vehicle], and insurance brokers should start selling cars.”