Implementing Bill 59: Pre-inspection regulation for reducing insurance claim fraud



No. A-19/96
- Auto
Property & Casualty

To the attention of all insurance companies in the Province of Ontario
licensed to transact automobile insurance


With this Bulletin, the Ontario Insurance Commission (OIC) wishes to draw your attention to a new regulation that is designed to reduce fraudulent insurance claims in Ontario.


Ontario Regulation 530/96 was made under the Insurance Act, as amended by Bill 59 (the Automobile Insurance Rate Stability Act, 1996), and was published in The Ontario Gazette on December 28, 1996. The regulation requires insurance companies to inspect many private passenger vehicles within 10 days of insuring them.


Ontario Regulation 530/96 becomes effective January 1, 1997.


The regulation represents a significant initiative developed by an industry-government committee representing a broad cross-section of the insurance industry, including the Canadian Coalition Against Insurance Fraud. The recommendations of the committee formed the basis of the regulation.

Insurers should make a special effort to communicate features and
importance of pre-insurance inspection


To ensure the effectiveness of this regulation for insurers and consumers, insurers should make a special effort to communicate to their staff, agents/brokers and adjusters, and finally to consumers, the importance and timeliness of the pre-insurance inspection of their vehicles for insurance purposes.


The Canadian Coalition Against Insurance Fraud has produced an industry model to help the insurance industry set up pre-insurance inspection programs and develop effective procedures. The model stresses that it is important for insurance companies to clearly communicate with their insureds the need for an inspection and the consequences of not having a vehicle inspected.


The model, entitled Pre-Insurance Vehicle Inspection Industry Model, was distributed to insurers under Ontario Auto Coalition Update, Transition Notes, OAC #96-40 on December 17, 1996.

Highlights of the pre-insurance inspection regulation


This regulation focuses on the visual inspection and photographing of vehicles as part of the insurance application process and is aimed at preventing insurance fraud. It does not deal with vehicle safety inspections which are required by the Ministry of Transportation.


The main objective of pre-insurance inspection is to reduce fraudulent insurance claims that have been made for " phantom " vehicles (where a person insures a vehicle that does not exist and subsequently claims that it was stolen); non-existent equipment and accessories; and pre-existing damage.

Some key provisions of the regulation are:


  • Insurers are required to visually inspect and photograph many used private passenger automobiles before issuing an automobile insurance policy in Ontario. The regulation exempts some vehicles (see below). The inspection must be done within 10 days of insuring the vehicle. The time and place of an inspection must be reasonably convenient to the customer. The inspection costs are to be paid by insurers.

  • Vehicles exempted from this regulation include: commercial vehicles, public vehicles, motorcycles or motor-assisted bicycles, off-road vehicles, motor homes, camper units and private passenger automobiles that are more than 10 years old. Insurers are expected to document the reasons why they have exempted any vehicle from an inspection.

  • Companies will not be required to inspect automobiles acquired by their customers if the customer has been continuously insured by them for the past three years. (It is important to note that on January 1, 1998, the continuous insurance requirement will be increased to four years. On January 1, 1999, the continuous insurance requirement will be increased to five years.)

  • The inspection, which includes photographing the front, rear, and sides of the vehicle as well as the identification number (VIN) on the vehicle’s compliance label, will be carried out by a service provider or person that is authorized by the insurer.

  • The person or organization carrying out the inspection must record the following information: the VIN from the VIN plate affixed to the vehicle; the VIN on the compliance label on the vehicle; the vehicle’s make, model and model year; a description of modifications made or equipment added to the vehicle; a description of unrepaired damages, the name of the service provider or inspector that carried out the inspection.

Monitoring the effectiveness of pre-insurance inspection


Insurers should maintain records of their inspections, such as the total number of inspections conducted, reasons for exempting vehicles, and the use of their inspection reports in resolving property damage claims.


The Government may ask insurers to provide information on their inspection programs in order to assess the effectiveness of this regulation.

Practice suggestion


A practice that insurers should consider is to reinforce the message, in their marketing and post-sale communications, that customers should notify their insurers of any added equipment or modifications made to their vehicles.

Questions-and-answers sheet


To help facilitate your training and communication efforts to your staff, agents/brokers, adjusters and consumers on this new regulation, we have prepared the attached questions-and-answers sheet for your use.


Also attached is a copy of the text of Ontario Regulation 530/96 which sets out the minimum requirements for each insurer’s pre-insurance inspection program. A copy of this regulation is available in French upon request which should sent by fax to the Attention of Administrative Officer, OIC, (416) 590-7070.

D. Blair Tully

December 30, 1996


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