Does the Auto Insurance System in Ontario Need to Change?

This is the question currently being contemplated by the Ontario government.  They are inviting drivers and consumers to share their views on how to lower the province’s auto insurance rates, part of a broader initiative on auto insurance reform.

I do not intend to give a complete background on the issue or opinions on everything that needs to be fixed, or I would lose all readers by the 100^th page! For a very brief background on the issue, visit “Ontario wants to hear from Consumers about How to Lower Auto Rates”   and when done reading this document, visit Here to fill out the very brief survey and have your say.

I would like to give you my opinion on a couple of the items being looked at:

• Does the Auto Insurance System in Ontario need to change?

Um…… YES, YES, YES, YES… and, oh ya! YES!!!!

My number 1 priority is working with the insurance companies and the government on changes to the auto insurance product here in Ontario that are sustainable and in my clients’ best interest.  Customers are paying too much for their car insurance protection.  Although often referred to on twitter as the most expensive rates in Canada, the world…. the galaxy… this is not accurate.  All indications show that the title for most expensive car insurance prices in Canada currently belongs to the government run auto insurance system in British Columbia, but this does not change the fact that car insurance in Ontario is expensive!

There are many things that need to be fixed.   When you have a system where all our clients are paying too much for their car insurance, AND the insurance companies themselves are losing money on car insurance (the latest available stats from Insurance Bureau of Canada (IBC) state that car insurance providers collectively spent $1.02 on claims for every dollar of premium they brought in for Ontario auto insurance in 2017.  I don’t have updated info for 2018, but I can tell you that it does not look any better from what I can see!)  So, we have a product with prices too high for consumers.. being provided by companies losing money… Yes, auto insurance in Ontario needs to change.

• So what’s the answer?

Great question. There are many things that need to change and it is in many different areas that are beyond the scope of this article (government regulation and bodies, use of technology, the actual product itself, legislation, etc.).  The important thing is to avoid band-aid solutions, avoid implementing random rate decrease numbers enforced without changes to the costs of the product currently in the system.  We need to dig in to the root cause and rebuild auto insurance in Ontario.  It is critical that the voice of the consumer, the Independent Insurance Brokers of Ontario and their association (IBAO), be at the table to represent our clients.

One thing I would like to directly comment on, that is often mentioned in the media, is the use of geographic territories in rating for car insurance.  Sometimes it is referred to as postal code discrimination. What this means is that insurance companies use postal codes to determine which areas have the most frequent and expensive claims.  Your rates are directly impacted by where you live.   In my opinion, removing the ability to use where you live, as a rating factor for car insurance would be more discriminatory than not using it.  I would prefer to see the use of even more finely divided geographic territories (more rating territories), to even better reflect the actual cost of providing insurance to the people in those territories.  Having the best insurance prices for our clients in the areas that cost the least to provide it to them, just makes sense.  In my opinion, taking away geographic rating tools from insurance companies would see rates go down for a minority of people in certain areas (specifically a very few areas in Toronto, like Brampton), and rates going up significantly for those in the areas that have the least risk (most of the rest of Ontario). That is not good for anyone!

• What should I do?

Well, now that you have some insight into this issue, make your opinion heard before the closing date of February 15th, 2019. The survey only takes a couple of minutes and it is important that the voice of our clients are heard by the government.  If you agree with my points on geographic rating tools above, then you will answer, “Completely agree” to the question: “Drivers should pay different rates for car insurance based on where they live.”

I applaud the Progressive Conservative government of Ontario for looking at this very important issue for the people of Ontario.  I remain optimistic that this process will encourage constructive feedback to support a positive change to auto insurance.  Once the process is complete, hopefully, the end result will be that we will be able to provide our clients with car insurance that costs less, provides the proper level of protection for claims, is more convenient and enables you to make informed decisions with the help of your independent insurance broker!