Why are car insurance rates in Ontario so high?

We all know that car insurance in Ontario is expensive, and this is why.

On average, Canadian insurers are paying out as much in claims as they’re earning in revenue. Insurance fraud, increasingly severe weather, and a handful of secondary factors have raised the cost of insurance in Ontario over the last two decades.

This is how it happened.


Insurance fraud in Ontario raises rates

Insurance fraud costs $1.6 billion dollars every year, which works out to about roughly $165 in extra insurance paid for each of Ontario’s 9.7 million drivers every 365 days. It’s also worth noting that insurers have paid out $1.02 for every $1 they earned in 2016. They’re not turning as much of a profit as we tend to think!

Insurance fraud in Ontario is a major contributor for rising rates, making it doubly important to get all possible information from the other driver in the event of an accident.  Fraud isn’t an issue in Ontario alone, but the province is feeling its effects more heavily than other provinces due to its sheer size.



Canada’s weather has become more extreme

According to the Insurance Bureau of Canada, severe weather caused $1.9 billion in damage in 2018 alone. No single weather event caused relate claims to rise, but it’s had a noticeable cumulative effect on the industry.

That same report from the IBC lists several major examples of Ontario’s extreme weather and how much they cost the insurance industry in 2018:

  • February storms that caused over $25 million in damages
  • A storm in early April causing over $40 million in damages
  • An ice storm in mid-April that caused $190 million in damages, mostly in Southwestern Ontario
  • A windstorm in early May that caused $380 million in damages in Ontario (another $30 million within Quebec)
  • A flood in Toronto on August 7 that caused $80 million in damages
  • A tornado in the Ottawa (and Gatineau) region caused $295 million in damages on September 21

That’s just for Ontario in 2018 alone, but the rest of the country has experienced its own severe weather and natural disasters in recent history as well:

“IBC data shows that the annual economic cost of disasters around the world has increased five-fold since the 1980s. From an average of $25 billion a year in the 1980s, it increased to an average of $130 billion a year in the 2000s.”

Insurance Bureau of Canada



Other factors

Several other factors have contributed to high insurance rates in Ontario, compounded on top of the costs associated with insurance fraud and increasingly severe weather patterns.

More Distracted Driving: Unfortunately, there are some grim numbers to support that: deaths in collisions due to distracted driving have doubled since 2000, according to the provincial government.

More Expensive Vehicles: Today’s cars cost a lot more to repair and replace than they did 10 or 20 years ago. Now they have smart displays, a built-in GPS, rear-view cameras, sophisticated driver assistance features, smartphone integration, and data-processing software making them viable to connect to the Internet of Things. Higher costs of replacement mean higher monthly rates.

More Inflation: While not a big problem on its own, inflation has contributed modestly to the higher insurance rates we all see in Ontario today. Economists haven’t figured out how to stop it yet, but we’ll let you know as soon as they do!


Understanding car insurance rates in Ontario

In Ontario, every insurance company must have changes to their auto insurance rates approved by the Financial Services Commission of Ontario (FSCO) and each quarter, FSCO publishes these rate changes. The latest rate changes have been released.


"Car insurance that hurts way, way less" beside toy cacti.


FSCO’s third-quarter report for 2018 indicates that rates are set to rise by 2.06%. That’s an average based on 20 insurance companies, representing around 50% of the market in Ontario. Not all drivers will see increases, however, as rates still hinge on driving records that can and do improve without accidents over time.


2017 4th-quarter car insurance rates in Ontario

FSCO reported that in the fourth quarter of 2017, approved rates increased on average 1.03%. While this increase reflects the average drivers may see upon renewal, the actual range in rates approved is significant: some Ontario drivers could enjoy a decrease in the premiums they pay of about 12.67%, while others could see their rates increase as much as 9.43%. It all depends on who you have your coverage through and the rate change they’ve been approved to apply.

“Consumers are urged to shop around for auto insurance,” says FSCO in its quarterly report. “Ontario has a very competitive marketplace.”

In the previous quarter, auto insurance rates decreased 0.1%.


Can I expect Ontario car insurance to drop?

Car insurance rates in Ontario can drop on a quarterly basis if approved by the Financial Services Commission of Ontario, although you’re most likely to see general increases on an annual basis. Inflation contributes to rising prices on its own, ranging from 0.93% in 2013 to 2.57% in 2018, which can easily account for a large portion of rising insurance in a given year.

Occasional drops do happen with legislation and regulation, though. For example, the provincial government mandated auto insurance discounts for drivers who could prove they used winter tires, helping to lower the cost of driving for those who invested driving safety. These don’t happen every year, of course, but you can use these advantages to lower your rates.

FSCO encourages consumers to shop around for their Ontario car insurance coverage and it only makes sense (and cents). At aha insurance, we’ve simplified your shopping by offering a solution that enables you to shop for both your home and auto insurance whenever and wherever you want. And even better, you can quote and purchase your policies completely online in less than 6 minutes.

Seriously, what else can you do in 3 minutes?

Boil half an egg?

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