Ontario: Private Auto Insurers Looking for Big Profits, Offer Driver’s Usage Based Insurance

Update: see previous posts – September 23, 2013 NDP Leader Andrea Horwath Accuses Insurance Industry of Jacking Up Auto Premiums, Sept.19/13 Ontario: Liberal MPP Mike Colle Wants to Pass Law to Appease Insurance Companies, August 24, 2103 Ontario: Auto Insurance Lowered by 15% Over Next 2 years, May 29, 2013 Ontario Car Insurance Rises Despite Promised Cut by the Liberals, says NDP, May 10, 2013 Ontario: Premier Wynn Pleases Financial Supporters in the Insurance Industry by Delaying Auto-Insurance Decreases, May 3, 2013 Ontario: Liberals to Build Additional HOT Lanes and Introduce High Occupany Toll Lanes, May 2, 2013 Ontario’s 2013 Budget: Driver’s Will Save On Auto-Insurance Premiums in Future, May 1, 2013 Ontario: Driver’s Should Save $225 Every Year Based On May 2, 2013 Budget, April 30, 2013 Ontario Auto Insurance: Accident victim Wins Challenge to Ontario’s $3,500 Minor Injury Cap, March 2, 2013 Ontario: If Auto-Insurance Premiums Are Not Lowered, Ontarians May Face Spring Election, February 5, 2013 Ontario: Time to Reduce Auto-Insurance Premiums for All Ontario Drivers, December 6, 2011 Auto-Insurance in Ontario – The Most Expensive Insurance in the Country,February 19, 2011 Diminished Value to Motor Vehicles Post Accident, August 29, 2010 Auto Insurance Companies Whine about Medical Costs, August 22, 2010 Auto Insurance Rules Change September 1, 2010 (Ontario), November 13, 2009 Home Insurance Skyrockets in Ontario, November 5, 2009 Liberals Take Care of Ontario’s Auto Insurance Companies, October 5, 2009 Ontario Liberals Support Auto Insurance Profits, July 19, 2009 Insurance Rates Skyrocket in Ontario, June 11, 2009 Insurance Companies exercise discrimination due to “perceived genetic risks”., May 18, 2009 Ontario Auto Insurance – Reducing Accident Benefits from 100 to 25 Thousand Dollars.

If you spend a lot of time in rush hour traffic, or spend time driving at night, usage-based insurance may not work for you. Congestion in Toronto can make a short car ride unbearable.
If you spend a lot of time in rush hour traffic, or spend time driving at night, usage-based insurance may not work for you.

GTA drivers could get relief as insurance companies launch usage based policies they say can cut cost of insuring car by 15 per cent.

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Auto insurance in Ontario is mandatory, you can’t drive a vehicle without it.

Ontario doesn’t have public auto insurance (government run and controlled insurance) and as a result, people that call Ontario their home, pay the highest auto-insurance rates in the country, due to the costs that private auto insurance companies charge drivers in Ontario.  Private insurance companies could charge alot less for auto-insurance, given that there are more licenced driver’s in Ontario than any other province/territory, but they choose to continue to charge the highest rates in the country, to maximize their profit margins.

The Ontario Liberal government won’t even look at offering Ontarians lower auto-insurance by reviewing public auto-insurance (driver’s in BC have their auto insurance administered by the Liberal government and pay less for insurance there) given their close relationship with the auto-insurance industry.  The Liberals receive donations from the auto-insurance industry and when the donation is offered, the liberals don’t refuse them.

Private auto-insurance has become more and more expensive, with less and less benefits.

Car insurance companies are lining up at the door of Ontario’s financial services regulator seeking approval to launch a new type of policy they say can cut the average annual cost of insuring a car by 15 per cent.

For GTA drivers, who pay the highest premiums in Canada, it is welcome news. If so-called usage based insurance is rolled out in a big way and you are willing to give up some privacy, you may be able to save a fair bit of money. If the Ontario government makes good on its promise of a two-step, 15 per cent cut in rates starting next year, the combined savings could be substantial.

Traditional car insurance polices reward past behaviour: If you don’t make claims, are in a lower risk demographic and live in a place with fewer accidents you get a break. Usage based insurance rewards current behaviour by monitoring how you drive today and comparing it to a benchmark.

Quebec-based Desjardins Insurance opened the door in May when it launched its Ajusto program. The company offers a 5 per cent discount for enrolling and installs a wireless device in your car’s diagnostic port that tracks your driving patterns.

The device measures distance travelled, frequency of hard braking and fast acceleration, how quickly you turn and the time of day you use the car. The information is used to create a profile of your driving habits, which is compared to the benchmark. You can view your profile on Desjardin’s website and see a rolling estimate of how much of a discount you will get at renewal.

Given that the average cost to insure a car in the GTA is $1,500 per year, according to the Insurance Bureau of Canada, the savings could be substantial. My household is a two-car, suburban family. Our renewal with TD Meloche, though below average, still came in at $2,700. Desjardin says the maximum you can save is 25 per cent, so the thought of shaving $675 a year from the insurance bill is appealing.

Ontarians pay the highest cost for auto-insurance in any of the provinces/territories in Canada.  Provinces that have government run public auto insurance pay the lowest rates in Canada. The Ontario provincial liberals have been supporting their buddies for years in the insurance industry, especially those private companies that provide motorists auto-insurance.
Ontarians pay the highest cost for auto-insurance in any of the provinces/territories in Canada. Provinces that have government run public auto insurance pay the lowest rates in Canada. The Ontario provincial liberals have been supporting their buddies for years in the insurance industry, especially those private companies that provide motorists auto-insurance.

Insurance Bureau spokesman Pete Karageorgos says most of the big players are looking at applications to sell the product. (TD Meloche has not applied, “but is exploring its options,” a spokesman said.) Since each plan must past a rigorous review by the Financial Services Commission of Ontario (FSCO), which regulates insurance, progress may be slow. The agency wants to make sure benchmarks are fair and transparent and that the assumptions behind the plans are reasonable.

One issue is the privacy of the information collected. A FSCO presentation delivered at insurance industry events says that since the devices “could be viewed as an intrusive ‘big brother’ technology, it is important that consumers are fully informed of the type of information being collected, how the information will be used and give consent in writing when agreeing to participate.”

Ryan Michel, an actuary and chief risk officer for Allstate Canada, says Allstate hopes to offer a plan within the year. The company has 5 per cent of the GTA car insurance market and is one of the top 15 insurers in Canada.

“We think in markets like Ontario there will be demand for this,” Michel says. “It gives people a better understanding of how they are driving and if you drive better than average you can get a reward.”

Michel says there are four Ajusto-type programs operating in 47 U.S. states. Allstate has been offering a U.S. plan since 2010 and in three years has attracted 430,000 new customers.

He says the policies appeal to cash-strapped families with children ever eager to save money. Parents wanting to reduce the high insurance cost of young drivers are another group. The driving information is readily available online, so parents can see exactly how well their teens were driving last night. Seniors who drive less frequently and also more cautiously also like the plans.

The good news, is that if your driving is worse than average, you will not face a rate increase. But if you have an accident, you won’t be able to fudge what happened: insurers are required to share the information with police.

Desjardins spokesman Joe Daly says his company has attracted 40,000 new customers in four and a half months and is very happy with the launch. He cautions that few people will be the ‘perfect drivers’ who get a 25 per cent discount. The average is more likely 12 to 15 per cent.

In Desjardins’ model, if you drive more than 15,000 km a year – not a lot for GTA commuters – you can’t earn more than a 15 per cent reduction. That’s because you’re penalized for exceeding that mileage limit and are probably driving at high risk times of day like rush hour. You are also penalized for late-night driving, because adverse weather tends to have a greater impact on accidents at night and statistically the accidents are worse.

Daly says the usage based plans are ideal for someone who lives in the city proper, uses the TTC to get to and from work and drives less frequently. If they avoid rush hour and late night driving, they can do well.

I put about 30,000 km a year on my car, use major highways in rush hour and hit the road early when it’s dark. So a usage based plan may not give me much of a break. But for many others, when coupled with the Ontario government’s promised cuts, it could offer much-needed relief from the country’s highest car insurance rates.

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One thoughtful comment

  1. The reason my insurance in Ontario is so high, is because the government forces us to get Accident Benefits.

    I pay $1824 per year for our two vehicles and $802 (43%) of that total is for accident benefits.

    Government needs to gets it noise completely out of insurance business … public insurance (public anything) is a far worse idea than private firms competing for our business.

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