Jeffrey Wade
Auto insurance rates in Ontario are high due to a multitude of factors, including insurance fraud, severe weather, inflation, and the high cost of repairing modern vehicles. The average Ontario car insurance premium is $1,744, with Toronto drivers paying an average of $2,325. The COVID-19 pandemic also played a role, with insurance companies facing financial strain due to inflation, part delays, long repair times, high theft rates, and substantial claims.
| Characteristics | Values |
|---|---|
| Average estimated premium in Ontario | $1,744 |
| Percentage increase in average premium since 2021 | 12% |
| Number of approved rate increases in Ontario in 2022-23 | 29 |
| Number of approved rate increases in Ontario in 2021 | 1 |
| Number of approved rate increases in Ontario in 2020 | 0 |
| Ontario's ranking among Canadian provinces for highest private passenger auto insurance premiums | 1st |
| Ontario's ranking among Canadian provinces for car crash injuries | Close to last |
| Ontario's ranking among Canadian provinces for auto theft claims costs | 1st |
| Increase in auto theft claims costs in Ontario between 2018 and 2023 | 524% |
| Increase in cost of new passenger vehicles in Canada over the past three years | 12.1% |
| Increase in cost of vehicle parts and replacement in Canada over the past three years | 18% |
| Average rate increase approved by the Financial Services Regulatory Authority (FSRA) | 6.5% |
| Number of insurance providers approved for rate increases since the start of the year | 22 |
What You'll Learn
Inflation
Ontario's auto insurance rates are expected to continue rising due to inflation, with the rate comparison website RATESDOTCA forecasting a 5% increase in the first quarter of 2023 and up to a 7% increase in the second quarter. The inflation rate in Canada reached a nearly 40-year high of 8.1% in June 2022, impacting the cost of new, used, and rental cars, as well as car parts. The increase in car prices, along with the higher cost of living in Ontario, contributes to the overall increase in insurance rates.
While inflation is a contributing factor, it is essential to consider other factors that impact auto insurance rates in Ontario. These include insurance fraud, severe weather events, distracted driving, and the increasing cost of vehicle repairs.
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Return to pre-pandemic traffic levels
Auto insurance rates in Ontario are rising as traffic returns to pre-pandemic levels. During the pandemic, insurance companies cut premiums or offered rebates due to fewer accidents and lower costs. Now, with more people returning to offices and outdoor activities, traffic and accidents are increasing, leading to higher insurance rates. Tanisha Kishan, an insurance expert, predicts that consumers will likely experience some form of increase in their insurance renewals.
The return to pre-pandemic traffic levels is one of several factors contributing to higher auto insurance rates in Ontario. Others include inflation, labour and supply chain shortages, and the increasing cost of vehicle repairs and replacements due to new technology.
Ontario's auto insurance system is highly regulated, and the province has the highest private passenger auto insurance premiums in Canada, according to the Auditor General, Bonnie Lysyk. The system's inefficiencies and lack of competitiveness drive up costs for consumers.
The increase in traffic and accidents is not unique to Ontario, as other provinces in Canada have also experienced similar trends. However, the high insurance rates in Ontario are particularly notable due to the province's size and the impact on a large number of drivers.
While the return to pre-pandemic traffic levels is a significant factor, it is essential to consider other factors affecting auto insurance rates in Ontario. The combination of these factors results in higher costs for consumers and challenges for insurance providers.
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Rise in auto theft
Auto theft is a significant factor in the high cost of auto insurance in Ontario. In 2022, over 105,000 vehicles were stolen across Canada, which amounts to a car being stolen every five or six minutes. In 2023, that number rose to over $1.5 billion in theft claims across Canada, with $700 million in losses in Ontario alone. Auto theft claims in Ontario rose by 524% between 2018 and 2023, surpassing $1 billion for the first time.
The rise in auto theft is due in part to the sophisticated techniques used by organised crime groups. One common method is a relay attack, where thieves intercept the radio frequency used by a key fob to unlock a car remotely. Thieves can also access the electronic diagnostic port under the steering wheel to reprogramme the car. Cars are then sold off, smuggled through ports, given a false vehicle identification number (VIN) and used by organised crime groups, or stripped down and sold for parts.
The rise in auto theft has resulted in increased insurance premiums for Ontario drivers. In 2022, Ontario drivers paid between $125 and $140 a year just to cover the cost of auto theft. Some insurance companies are also adding surcharges of up to $500 for vehicles at high risk of being stolen. Overall, auto insurance premiums in Ontario are expected to rise by as much as 25% in 2024.
To combat auto theft, insurance companies are offering rebates or installing tracking systems in vehicles at high risk of theft. The government of Ontario has also announced $51 million in investments over the next three years to target car thefts linked to organised crime.
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Cost of healthcare
The cost of healthcare is a significant factor in the high auto insurance rates in Ontario. The mandatory accident benefits coverage in Ontario provides comprehensive financial protection for individuals injured in automobile accidents, covering medical expenses that are not covered by the Ontario Health Insurance Plan (OHIP). This includes coverage for medical treatments, rehabilitation, income replacement, caregiver benefits, and death and funeral benefits. The high cost of healthcare in Ontario, particularly for treatments and services not covered by OHIP, contributes to the high cost of auto insurance as insurers need to account for these expenses when setting premiums.
Additionally, the increasing complexity and sophistication of modern vehicles contribute to higher repair costs, which are reflected in insurance rates. The advanced technology and safety features in today's cars, such as sensors, cameras, and computerized elements, make repairs more expensive and time-consuming. The cost of vehicle parts and repairs has been surging in recent years, outpacing inflation and driving up insurance rates.
Furthermore, the frequency and severity of claims have increased due to factors such as distracted driving and extreme weather events. Distracted driving, often caused by the use of mobile devices, has led to more accidents, injuries, and fatalities, resulting in higher claims for insurance companies. Extreme weather events, such as storms, floods, and ice storms, have also caused significant damage to vehicles, leading to increased claims and repair costs. These factors have contributed to the rising cost of healthcare and, consequently, auto insurance rates in Ontario.
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Extreme weather
In Ontario, extreme weather has caused significant damage in recent years. In 2018, a windstorm caused $380 million in damages in Ontario, and a tornado in the Ottawa region resulted in $295 million in damages. More recently, in 2022, a windstorm in May caused $1 billion in damages, and Hurricane Fiona in September led to $800 million in losses.
The increase in extreme weather events has contributed to higher insurance claims and premiums. As a result, consumers in Ontario are facing higher auto insurance rates due to the impact of extreme weather on the insurance industry.
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Frequently asked questions
There are several reasons why auto insurance rates are so high in Ontario. Firstly, insurance fraud costs $1.6 billion dollars every year, which equates to roughly $165 in extra insurance paid by each of Ontario's 9.7 million drivers. Secondly, severe weather events have caused billions of dollars in damage in recent years, with cumulative effects on insurance rates. Thirdly, there has been an increase in distracted driving, leading to more collisions and subsequent insurance claims. Finally, vehicles today are more expensive to repair and replace due to the inclusion of advanced technology and features.
Auto insurance rates in Ontario are influenced by various factors, including a person's driving record, age, gender, marital status, type of vehicle, annual kilometres driven, and whether the vehicle is used for commuting. Additionally, the type of policy chosen and the inclusion of optional coverages, such as collision and comprehensive insurance, can impact the cost.
To save on your auto insurance premium in Ontario, consider the following strategies:
- Shop around and compare rates from different providers.
- Enroll in a usage-based insurance program that offers discounts for safe driving behaviour.
- Reduce optional coverage for older vehicles with low market value.
- Increase your deductible to lower premium costs.
- Bundle your home and auto insurance policies for a discount.
- Install winter tires, as many companies offer discounts for this.
The auto insurance market in Ontario is expected to continue experiencing rate increases in the coming years. Inflation, labour and supply chain shortages, and a return to pre-pandemic traffic levels are driving up the costs for insurers, leading to higher premiums for consumers. Additionally, issues such as auto theft and the rising cost of healthcare for accident victims are contributing to upward pressure on insurance rates.
