Auto insurance just keeps getting more expensive for Ontario drivers

After the first quarter of 2019, the Ontario driver will spend on their auto insurance policies by almost 3% more. The entire industry recently adjusted their prices and for the sixth quarter in a row, the prices spike once again. The average rate of auto insurance policies in Ontario, Canada is about $1,445, being exceeded only by the prices in British Columbia, which are now estimated at $1,680.

 

Auto insurers, given permission to grow their rates

The Financial Services Commission of Ontario (FSCO, for short) has recently offered the Economical Mutual Insurance Company the permission to raise their rates by 11,4%. The group holds more than 6.20% of the Ontario insurance market. Because of a series of reasons, the same permission was offered to almost all insurance companies in Ontario. Fraud, urbanization and the lack of standard rates are three main reasons to which the high premium rates are attributed. But the insurance market here also seems to offer some of the best benefits and coverage in Canada.

No standard rates

There are no standard premium rates in Ontario. This allows insurers to play with and adjust those, depending on nothing more than interests and profits. Private insurance companies make the rules of the game in Ontario, and this seems to play its rightful role as well.

Urbanization

While road congestion is not Canada’s biggest struggle, urbanization seems to influence the auto insurance rates practiced by insurers. More drivers, more new drivers (the legal licensing age is 16) and higher numbers of accidents also contribute to extreme insurance rates on personal vehicles. While statistics show low auto accident fatality rates in the province, insurers are unwilling to take unnecessary risks. It’s common for these companies to factor traffic and congestions rates as determinants of fatality accident or collision likelihood. Speeding fees, accidents on the record, age, and sex also contribute to premium rates.

Fraud

Nearly every auto insurance provider in Ontario received permission to raise their rates. Fraud is one of the main reasons why insurance rates have grown so much over the past several years. The industry itself is not a high-profit margin one. Each year, insurers in Ontario, Canada lose impressive amounts of money to fraud. From organized crime rings to individual fraudsters, the insurers in the province are struggling with such attempts. These events cost Ontario consumers $1.3 billion yearly.

No matter the end result of fraud attempts, they always end with higher claims costs. To see sensitive changes in the auto insurance rates, fraud has to be stopped. The costs involved by claim settlement also have to be lowered, according to experts in the field.

Insurance companies lose money

A common misconception about insurers in the province is that they are gouging consumers. This is far from being true. Most companies in the sector lose important amounts on a yearly basis. Only in 2016, the overall combined loss for personal vehicles in Canada is estimated at 102%. To explain the situation in more simplistic terms, for every dollar collected by insurers from premiums, they have to pay $1.2 in claims and operating costs. While in other provinces insurers practice significantly lower rates, they still make a good return. This is no longer the case in Ontario.

The Auto Insurance Landscape in Quebec vs. Ontario

How is this possible? What can you do to avoid high premium rates, besides packing up and moving to Quebec?

Apparently, an insurance policy in Quebec costs a modest amount of $640, on average. This is more than two times less than the rates you will find in Ontario. The Alberta ARC Insurance brokers show that what helps Quebec maintain low, competitive rates is an effective combination of public and private insurance policies and limits on liability.

In Ontario, insurance comes exclusively from private companies. The high number of claims and lawsuits they face yearly make them struggle in keeping their premiums at competitive rates. Organized crime and fraudulent claims are two other relevant motives, as seen above.  

Tech-Heavy Automobiles Lead to Higher Premium Rates

Ontario is one of the most economically developed provinces in Canada. This means that the average consumer affords to invest in tech-heavy automobiles and in all the extra expenses that come with those. According to a How Canada Performs Report from June 2017, Ontario worked its way up to the second province with strong growth over the past few years. Overall, it ranks in the sixth place, but it seems to catch up with the more developed provinces.

Tech-heavy automobiles usually come with multiple sensors and camera. What was previously inexpensive to repair, it has now become a costly affair. Lane detection systems, blind-spot monitoring, and adaptive cruise control equipment demand higher repair costs than dents and minor collision repairs. The added labour time necessary to repair these sensors and the tech tools specialised shops must invest in also increase the repair costs.

Insurance companies react to these changes in consumer behaviour and adjust their premiums accordingly.

And for those drivers that think the penalties of driving without insurance are lower than buying one, the news is bad indeed. The average fine for driving without insurance is about $5.000 and it can even reach $25.000. Besides, drivers might have their licenses suspended for a year. This also results in the driver’s recognition as a high-risk driver and the insurance rates will be sensitively higher, in the future.

Although the driver in Ontario is seeing themselves as victims of a poorly-tailored insurance system, there are multiple real motives for the premium rates practiced in the province. Insurance fraud and other factors influence how much or how little consumers pay on their premiums. Instead of taking unnecessary risks, drivers should research which are the best premium rates in the province. There are numerous online tools and platforms that will come in handy, making the process smoother and ensuring consumers make the best decision.  

David Jackson

David is a personal finance expert, a professional male model, and an entertainment writer.