• Sun. Dec 3rd, 2023

Car Auto Insurance

It's My Car Car Auto Insurance

Doug Ford’s idea of lowering auto insurance rates means you pay your own repair bill

Rising rates for auto insurance are raising the stakes for politicians.

Premier Doug Ford keeps promising a fix, insisting he inherited a broken system from the last Liberal government. That’d be a full five years and two elections since he took over, but the blame game goes on.

The Liberals had talked up a 15 per cent reduction when they were in power. But they later reduced that promise to a “stretch goal” ― which stretched the truth, even if it briefly reduced rates by about three per cent.

As for the opposition NDP, they made a promise so preposterous in last year’s election you could drive a stretch limousine through it: New Democrats vowed to freeze rates first, followed by an unprecedented and unfathomable 40 per cent reduction within two years ― without saying how.

Trust us, say the rival parties.

That may be traditional politics. But it’s not classical economics.

Average rates have risen by as much as 37 per cent in some cities since 2021, according to a just-released survey of vehicle quotes by Ratesdotca, a Toronto-based insurer.

As ever, Brampton takes a beating with average premiums rising from $1,976 to $2,707. Toronto comes a close second with rates rising 19 per cent over two years to $2,325 (the province-wide average was 12 per cent).

As ever ― again ― the insurance industry blames inflation but also depredation (fraud and abuse). It says the increasing complexity of car repairs and the sophistication of medical treatment drives up costs that must be recouped from drivers.

As ever, voters want rate relief. And politicians are forever telling people what they want to hear, especially when playing the populist card.

Within months of first winning power, Ford’s Tories issued an ambitious “blueprint” for actions and reductions:

“Ontario’s Government for the People is taking action to fix the broken auto insurance system,” it boasted. “The government will put drivers first and put money back in people’s pockets by lowering costs, increasing consumer choice and making the auto insurance market more competitive.”

But it took another three years for the premier to finally, belatedly, denounce the discriminatory geography calculus now dividing rates along regional lines ― driving Brampton premiums through the roof:

“That’s totally unfair for the people of Brampton, of Scarborough ― they’re going after these people based on their postal code,” he told reporters in the summer of 2022.

Nearly a year later, nothing has changed.

The challenge for Ford is that equalizing rates geographically — pooling risk — comes at someone else’s expense. It’s a zero-sum game, because lower premiums in Brampton requires higher prices in London (which enjoys lower rates now).

The Tories want to retain their grip on the vote-rich ridings of 416 and 905, without alienating their rural and regional base across the rest of the province. Progressive Conservative loyalists don’t want the premier robbing (rural) Peter to pay (big city) Paul.

To be sure, there are many explanations for Brampton’s consistently high rates: Fledgling public transit can’t take people where they need to go quickly in a sprawling city, so workers drive more frequently, further and faster (higher speeds on highways, deadlier crashes and costlier repairs).

But these are all generalizations and statistical clusters that don’t differentiate between individuals who may have perfectly respectable ― possibly perfect ― driving records. Any way you slice and dice the numbers, geographical discrimination is discriminatory ― it stereotypes people based on where they live.

The problem with price discrimination is that insurance is now a mandatory product. What’s unfair is that you are can’t reduce your rates by improving your driving; all you can do is move to another postal code or shop around in hopes of a more competitive rate, which isn’t as easy or efficient as it sounds.

Amid their indecision and inaction, Ford’s Tories have hit upon a shell game that may yet sell: Lowering insurance costs by lowering insurance coverage.

A little-noticed budget pledge, scheduled to take effect next year, would give a penny-pinching driver the option to cut costs by declining collision coverage for repairs to their own car if it’s damaged in a no-fault accident. Put another way, if someone rear-ends you on the road ― no fault of your own ― your insurance company wouldn’t pay a penny, nor could you sue the offending driver for a cent in court.

You have to sign a form of waiver, appropriately called an “agreement not to recover for loss or damage from an automobile collision.” But you’d best read the fine print carefully.

Perhaps this is the government’s idea of fulfilling its promise to “put money back in people’s pockets by lowering costs.” Just remember that it also lowers the insurance company’s costs by lowering their payouts.

No, it’s not a reduction in rates. It’s a reduction in coverage.

It’s not a lower cost for an equivalent product. It’s a lower price for lower protection.

This policy change doesn’t engender greater efficiency by the industry. It’s just enables lesser responsibility by the insurer.

Perhaps that’s the government’s definition of consumer choice. But buyer beware ― caveat emptor and caveat voter.

Clarification — May 30, 2023: This column has been updated to reflect that a budget pledge by the provincial government, scheduled to take effect next year, would give a driver the option to cut costs by declining collision coverage for repairs to their own car, if it’s damaged in a no-fault accident.

Martin Regg Cohn is a Toronto-based columnist focusing on Ontario politics and international affairs for the Star. Follow him on Twitter: @reggcohn

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