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Toronto/GTA Auto Insurance premiums are still in the news. What is fair and reasonable?

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For as long as memory serves, Toronto/GTA auto insurance premiums have been in the news for being "too expensive". The comparison is generally made either to previous years (if claims and therefore rates were increasing) or to other jurisdictions (where claims or benefits, and therefore rates, were less). Comparisons of this nature touted by the media tend to stir up public sentiment but are really of limited use or validity. Most will agree that nobody likes paying insurance premiums of any sort - not home, not business or life and certainly not auto insurance. A recent USA article (Feb 11, 2014) on the 10 most expensive US cities for auto insurance might suggest that Ontario drivers, insurers or regulators might be doing something right. Consider the following recent premium comparisons from the National Underwriter survey -

Philadelphia, PA - $2931 – No-fault system, weather and congestion

Miami, FLA - $3169 – No-fault system, hurricanes, extreme congestion, 9th worst drivers in the US

Louisville, KY - $3256 – No-fault system, dangerous city, high number of auto thefts.

Jersey City, NJ - $3267 – High congestion, icy winters, average of 35 minute commutes.

Hialeah, FLA - $3272 – Highest in Florida with no-fault system and hurricanes

Baton Rouge, LA - $3364 – Congestion and poor road conditions.

Newark, NJ - $3526 – No-fault system, proximity to New York city, snowy, icy winters, typical commute 31 minutes.

Grand Rapids, MI - $4042 – No-fault system, bad weather, poor road conditions.

New Orleans, LA - $4309 – About 12% of median household income, very poor road conditions, lawsuit legislation.

…and last but certainly not least

Detroit, MI - $10,723 – High crime rate, no-fault system. In Rosedale Park one insurers premium is $25,300!

Admittedly, auto insurance premiums in Toronto and the GTA are higher, and most likely the highest, of other jurisdictions in Canada and even in other parts of Ontario. The single biggest factor in this premium determination is claims experience which is monitored by local territories. Aside from issues relating to fraud, which contributes considerably to the cost of automobile insurance (and is found in every jurisdiction), other factors contributing to claims experience includes traffic density, rush hour congestion and driver frustration, climate, crime rates, poor road conditions, policy benefits (Ontario), and an expanding population upwards of 4 million. Is it any wonder that Toronto/GTA rates are the highest in Canada?

To put some actual numbers to this here is a current comparison (average of 8 leading insurers) of Ontario rates from several different jurisdictions. These are based on a 2014 domestic sedan, with a mature claim and ticket-free driver commuting 10 kms to work and with "full" coverage.

Ottawa - $1100

Thunder Bay - $1200

Pickering - $1700

Downtown Toronto - $1900

North Toronto - $1950

Brampton - $2500

Of course, these are "best case" premium scenarios but still a basis for comparison. Add a young driver, a claim, or a conviction or two, and premiums can easily increase dramatically.

Ontario automobile insurers are highly competitive and doing their best to keep premiums as low as possible and to allocate fairly without sacrificing claims reserves and financial stability. With maximum efficiencies and very little profit margin (0% - 8%) the answer to premium reductions lies in reducing claim costs or policy benefits. Some might think one answer would be to let the government look after it. One doesn't have to look too far to realize that there are no savings in replacing a private companies desire for profit through efficiencies with government largesse and bureaucracy. This is not a solution.

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