You may have heard in the news recently, discussion about postal code rating and fair insurance premiums in Ontario.
In this province, the Financial Services Regulatory Authority (FSRA) regulates automobile insurance. With the regulating body in control, insurance companies must receive approval from FSRA prior to increasing or decreasing their auto premiums. To ensure fair insurance rates to Ontario policyholders, FSRA uses statistics including claims history, safety features on the vehicle and driver details to generate the premium. In addition to those factors already mentioned, one key variable considered in the premium is the geographical location of the vehicle or driver. Individuals who live in urban areas are driving in places with higher traffic congestion that results in more accidents and ultimately more insurance claims. Theft frequency and cost of repairs also correlates with where an individual lives. Although some consumers feel this rating factor is unfair, where one lives is a reliable predictor of claims risk. There are currently 55 defined territories in Ontario but as indicated on the April 2022 Ontario Government’s budget, enhancements are being discussed to ensure fairness to Ontario auto insurance policyholders.
The introduction of usage based insurance (UBI) has allowed drivers, especially those negatively impacted by their geographical territory, to have more control over their auto insurance premiums. Usage-based insurance is a program that rewards safe driving behavior using a mobile application downloaded to your smartphone. The application uses your smartphone’s GPS, accelerometer, and gyroscope to assess how safely you drive and calculate your potential discount. The factors measured vary based on insurance company however, three main factors assessed are your speed, smoothness and focus. Driving the speed limit, limited hard breaking events and not using a hand held device while on the road will contribute to safer roads and lower insurance premiums. Even the most cautious drivers will encounter situations where speed or hard breaking may be necessary. To account for this, data is assessed using the average of multiple trips. Other driving behaviors such as turning, distance driven, time of day, type of road driven on and distracted driving are considered. If this program is something you are interested in participating in, please feel free to contact us for eligibility and more information.
As insurance brokers, our clients are our main priority. We want to ensure that we are offering the best coverage for the most competitive price. We understand our current system can be improved and we will advocate on your behalf to help make auto insurance premiums more fair for everyone in Ontario.