On April 23, 2015, the Liberal government announced that they’ll be making a bid to lower car insurance for Ontario car owners. The plan is to offer discounts to motorists who have installed snow tires during the winter months and to stop price hikes for drivers who were involved in minor, at-fault accidents. Moreover, the maximum monthly interest rate for auto insurance premium payments will be lowered from 3 to 1.3 per cent.
The government wants to offer drivers the choice to pay less in premium and receive less in benefits. Originally, basic auto insurance benefits were separated between medical/rehabilitation ($50,000) and attendant care services ($36,000). The Liberal party plans to combine the two benefits into a single one worth $65,000. Car owners will still have the option to pay for increased coverage to a total of $1 million.
But what does this all mean for drivers? Nobody wants to pay more than they have to, yet can we be certain that there will be enough coverage?
Insurance Rates in Canada by Province
Currently, Ontario has the highest insurance rates in Canada for average annual premium car insurance at $1,281. The reason is because Ontario is recognized as having high frequency of claims, lawsuits and injuries, in addition to fraud and crimes involving private insurance.
British Columbia follows behind with an average annual premium of $1,112 and third in the country is Saskatchewan with $1,049.
Manitoba has an average annual premium of $1,027, Alberta has $1,004, Newfoundland and Labrador has $749, Nova Scotia has $735, New Brunswick has $728 and Prince Edward Island and Quebec round out the provinces with average annual premiums below $700.
Why Ontario Has the Highest Rates
As mentioned above, Ontario suffers from a high level of insurance frauds. According to private insurers, male drivers under the age of 25 have the worst statistical records in that regard. Because of this, young drivers in this age range are forced to pay more, even if they haven’t been involved in any traffic violations or accidents.
In Manitoba and Saskatchewan, public auto insurance programs handle the situation differently. There they have a standard rate regardless of age or gender. This makes driving much more affordable for a 19-year-old student in Regina than it does for one who lives in Toronto.
While some drivers in Ontario believe this is a case of discrimination, private insurance companies continue reinforcing the idea that the prices are based entirely on statistical analysis. Drivers between the ages of 16 to 24 are accountable for 24 per cent of fatalities and 26 per cent of serious injuries, even though they only represent 13 per cent of the driving population. It’s the nature of driving in Ontario – with high population density, poor roads and high theft rate – insurance rates are higher than in the other provinces.
How Everything Will Change
The change in the insurance rate will cut excessive costs and give drivers in Ontario a lower premium. By offering a discount for winter tires installation, car owners can begin making protective measures of their own to not only stay safe but also to save money. Although the exact number for the discount has yet to be determined, some insurers have already started offering 10 per cent off the premium. As for those who are involved in a fender-bender or an accident of minor severity, the end of immediate premium hike is a big relief for drivers.
With the economy constantly changing – including the involvement of transportation apps like Uber – it appears that the government is making adjustments to serve commuters by working with organizations to ensure growth.
Why Change is Good
Change is good, because change is fair. But in a province where approximately 100 private insurance companies overseen by the government battle for consumers, fair play is not always evident. For example, a 2004 CAC’s investigation found that private insurers were luring businesses in by spending $290-million secretly as a commission for insurance brokers. The brokers weren’t helping customers get the best prices; instead they were working to get themselves the best commission.
According to a report by York University, in 2013, Ontario drivers overpaid for their car insurance by $840 million. That is about $100 for every licensed driver. Given today’s low-interest-rate environment, the return in equity should be no higher than 5.5 per cent, but it’s at 11 per cent, as set by Ontario’s insurance regulators.
The fact that the government is stepping in and making changes to the insurance rate is a good start. The goal is to continue reducing rates until they hit the average 15 per cent reduction mark by August, 2015.