Auto Insurance In Ontario: Why So Expensive?

Auto insurance in Ontario is expensive due to a variety of factors, including insurance fraud, severe weather, inflation, vehicle repairs, and an increase in car theft. The average cost of auto insurance in the province is around $1,744 per year, with some cities like Brampton and Toronto having even higher rates. Insurance fraud alone costs Ontario drivers approximately $165 to $236 extra per year. Severe weather events, such as ice storms and windstorms, have also contributed to the rise in insurance rates, with Ontario experiencing $1.9 billion in damage in 2018 alone. Inflation and the rising cost of vehicle repairs have also played a role, with modern vehicles equipped with advanced technology being more expensive to fix. Additionally, factors like distracted driving, collisions, and the return to pre-pandemic driving patterns have led to more claims and higher insurance premiums.

Inflation and vehicle parts shortages

Inflation

Inflation has contributed to the rise in insurance rates in Ontario. As inflation rates increase, insurers need to adjust their rates to keep up with the changing economy. While inflation rates have slowed down recently, with a rate of 4.3% in March 2024, it still impacts car insurance premiums. Inflation, along with other factors, has resulted in an average increase of 12% in car insurance rates over the last 18 months in Ontario.

Vehicle Parts Shortages

Vehicle parts shortages, particularly the global microchip shortage, have also played a role in increasing repair costs. The lack of semiconductor chips, which are essential for safety features such as airbags and brakes, has made repairs more expensive and time-consuming. This has led to longer wait times for repairs, with some drivers facing delays of weeks, months, or even longer. As a result, insurance companies have had to approve rate increases to keep up with the rising costs.

Impact on Insurance Rates and Premiums

The combination of inflation and vehicle parts shortages has had a direct impact on insurance rates and premiums in Ontario. The average estimated car insurance premium in the province has increased to $1,744, up from $1,555 in December 2021. This increase varies across different cities, with Brampton experiencing a 37% rise in insurance rates, making it the most expensive city for car insurance in Ontario.

In conclusion, inflation and vehicle parts shortages have contributed to the high cost of auto insurance in Ontario by driving up repair costs and prolonging wait times. These factors, along with others such as busier roads and high car prices, have led to insurance companies adjusting their rates and premiums to keep up with the changing economic landscape.

Poor weather conditions

Ontario has been experiencing increasingly severe weather, which has contributed to the high cost of insurance in the province. According to the Insurance Bureau of Canada, severe weather events caused $1.9 billion in damage in 2018 alone. The cumulative effect of these weather events has had a noticeable impact on the insurance industry.

In 2018, Ontario experienced several major weather events that caused significant damage and triggered insurance claims. These included February storms that caused over $25 million in damages, an April storm that caused $40 million in damages, an ice storm in mid-April that resulted in $190 million in damages, and a windstorm in May that led to $380 million in damages. The year also saw a flood in Toronto in August, causing $80 million in damages, and a tornado in the Ottawa region in September that caused $295 million in damages.

The frequency and severity of these weather events have contributed to the high cost of auto insurance in Ontario. Extreme weather events can cause extensive damage to vehicles, leading to costly repairs or even total losses. Additionally, the changing weather patterns across Canada have led to more catastrophic storms, which further increase the risk of damage to vehicles.

To protect themselves from the financial impact of severe weather, drivers in Ontario may need to consider purchasing comprehensive insurance coverage. Comprehensive insurance provides protection for non-accident-related threats and weather events. It covers damage caused by hail, heavy rain and flooding, wind, fallen trees, and fires resulting from natural disasters. While it may be more expensive, comprehensive insurance can provide peace of mind and financial protection in the event of major repairs or vehicle replacement due to severe weather damage.

Insurance fraud

• Knowingly lying on an application
• Stating previous damage to a vehicle, along with new damage
• Faking injuries or claiming more severe injuries than actually sustained
• Submitting healthcare claims after a person has recovered
• Making a claim for an accident that never occurred
• Automobile repair fraud
• Staging a car theft or lying about the value of the car

Fraudulent activity impacts not only the victims and insurers but also all drivers, as it increases costs. In addition, insurance fraud can have serious consequences, including denial of claims, policy cancellation, difficulty obtaining coverage in the future, and even jail time and criminal charges.

To protect yourself from insurance fraud, it is important to be vigilant and follow recommended protocols when reporting car accidents. This includes recording as much information as possible, such as taking photos, writing down the other driver's insurance information, vehicle registration, driver's license number, contact details, and a description of the driver. It is also crucial to contact the police, especially if you suspect a scam, and to notify your insurer, even if you decide not to file a claim.

By being aware of the types of insurance fraud and taking proactive measures, drivers can help reduce the impact of fraud on insurance premiums in Ontario.

High cost of vehicle repairs

The cost of repairing vehicles has increased significantly, and this is a major factor in the high cost of auto insurance in Ontario. Today's cars are equipped with advanced technology, such as smart displays, built-in GPS, rear-view cameras, driver-assistance features, and internet connectivity. These features are often placed in areas of the vehicle that are susceptible to damage, and the cost of repairing or replacing them can be very high. For example, the headlights on a leased Mercedes were quoted at $7,000.

The make and model of a vehicle also influence repair costs. Luxury and imported cars, for instance, typically have higher repair costs due to specialized parts and the need for expert technicians. The location of repair facilities can also impact costs, with urban areas like Toronto generally having higher labour rates.

The extent of the damage is another crucial factor in repair costs. While minor fixes may cost a few hundred dollars, significant structural repairs can easily reach thousands of dollars. According to AutoHut.ca, minor repairs in Ontario typically range from $200 to $800, moderate repairs from $800 to $2,500, and major overhauls from $3,000 to $10,000 or more.

In addition to the direct costs of repairs, there are also insurance deductibles to consider. In Ontario, these can range from $500 to $1,000, and they represent the out-of-pocket expenses that a vehicle owner must pay before insurance coverage kicks in.

The complexity and cost of vehicle repairs have contributed significantly to the high cost of auto insurance in Ontario. The advanced technology and specialized parts used in modern vehicles, particularly luxury and imported models, have driven up repair costs. Location and the extent of damage can also impact the final bill. With repairs often costing thousands of dollars, it's no wonder that auto insurance premiums in Ontario are so high.

Car theft

Organised crime groups are largely to blame for the rise in car thefts. These groups target vehicles that are in high demand in other parts of the world, such as SUVs and pickup trucks, and newer models. The Honda CR-V, for example, was the most commonly stolen vehicle in Ontario in 2022, with 2,684 cars stolen. The Lexus RX Series and the Dodge RAM 1500 Series were also popular targets, with 1,707 and 1,405 thefts, respectively.

Canada is becoming known as a "donor country" for vehicles, as it is relatively easy for criminals to steal cars and ship them overseas, where they are resold. The proceeds from auto theft are often used to fund organised crime and terrorism, both domestically and internationally.

To combat car theft, vehicle owners can take several precautions, such as parking in a garage or well-lit area, installing a steering wheel lock, or using a tracking device. However, as criminals become more sophisticated in their techniques, car theft remains a challenging issue to address.

The high rate of car theft in Ontario is a significant concern for residents and insurance companies alike, contributing to the overall expense of auto insurance in the province.

Frequently asked questions