Yet Ontario Premier Doug Ford has shown drivers a lot of love lately. Among other things, he’s cancelled and rebated license-plate renewal fees, removed some road tolls and promised to build new highways.
The high cost of automobile insurance has been on the government’s mind, as well. When COVID-19 shuttered schools and workplaces two years ago, Queen’s Park directed some financial relief for drivers, resulting in more than $1.3 billion in insurance savings dispersed to motorists who were driving a lot less during the lockdown.
In its recently unveiled 2022 budget, the Ontario government proposed new measures to reduce the cost of auto insurance, including changes that would provide consumers with more flexible coverage, a pledge to crack down on insurance fraud, as well as enhance fairness – including re-examining the use of postal code information to determine premiums.
Ontario drivers may soon be able to tweak their insurance coverage further, such as by making not-at-fault damage coverage, also known as direct compensation property damage (DCPD), an optional add-on. It’s an idea that could yield some savings for drivers on a tight budget. Those who own older cars that are worth less than the cost to insure them would be able to opt out of DCPD coverage, which is currently mandatory in Ontario.
If another driver is at fault in an accident, DCPD covers damage to your vehicle and its contents, and for the loss of use of your vehicle when damaged. But if you drive an older, inexpensive vehicle, you may wish to drop the coverage and welcome the lower payments (this is separate from collision coverage, which pays for repairs to your car when you’re at fault).
“There’s significant savings for the driver who accepts the risk,” says Matt Hands, insurance director at Ratehub.ca. “However, the cost of replacing or repairing the vehicle will be fully incurred by the motorist.”
The government wants to see more innovations adopted, chiefly usage-based insurance (UBI) programs that give drivers more control over their insurance costs. Sometimes referred to as pay-as-you-drive insurance, UBI has been around for nearly a decade in Canada. It relies on a telematic device that plugs into the OBD-II data port and collects information about the vehicle’s speed and driving characteristics, such as hard acceleration and braking (newer programs no longer use a plug-in and only require the driver’s smartphone).
The information is shown on the driver’s phone app and relayed back to the insurance company, which determines how safely the client is driving and assigns a numeric score that’s constantly changing. Drivers who opt for the surveillance system are promised at least a 10 per cent discount for signing up.
Despite the promise of instant insurance savings, a mere 15 per cent of Canadian drivers say they have tried UBI, and some of them went back to conventional insurance.
“Telematics is a tricky feature,” says Hands. “For the longest time it could not affect your rates going up, and only represented a benefit to the motorist.” But some insurers have changed the rules of engagement, introducing the prospect of higher rates for bad drivers.
Ratehub’s own survey of drivers, conducted in 2021, tapped into consumers’ trepidation regarding usage-based auto insurance:
- 77 per cent say they are concerned about potential rate hikes
- 67 per cent express concern about the accuracy of the programs
- 56 per cent have privacy concerns
- 51 per cent are hesitant in case it negatively impacts their rates
“If I have to pass someone on a two-lane highway and briefly accelerate to 125 km/h in an 80 km/h zone, am I going to be penalized?” Hands poses, echoing a common question. The reality is it depends on the insurance provider and their UBI program. If you consistently demonstrate poor driving behaviours, you could see your rates increase.
Hands says that insurers are listening to motorists’ concerns and are making changes. Some programs allow the driver to edit their driving record on the app to remove instances when another family member was driving the vehicle, or made an evasive maneuver to avoid a collision.
“It’s a great feature, but just know that if you edit too frequently, you will be put on notice by your insurer,” warns Hands. He’d like to see companies offer consumers a trial period with the software, so that they can experience the potential benefits and savings – something that a few insurers have instituted.
Hands would like to see more options for “pay as you go” insurance aimed at downtown city dwellers. Intended for low-mileage drivers whose vehicles sit at home while they commute to work by transit, the plan offers lower premiums because vehicles are mostly driven on weekends and not during accident-prone rush hours.
As for the much-despised territorial rating that assigns risk according to residential postal code, Hands says the government could choose to remove geography from the criteria, making communities like Brampton, Ontario, less expensive to insure a car. But the risk would be pooled across the rest of the province, raising everyone else’s insurance premiums, he says.
“Postal codes are a crude way of assigning risk,” Hands points out. “The province of Alberta has tried tying insurance risk to drivers’ credit score, which seems to have some validity.”
As Ontario moves ahead with auto insurance reforms through its Financial Services Regulatory Authority, Hands cautions that change comes slowly in this sector and that nothing is going to happen overnight.
“The industry has been slow to adopt digitization and other technology in Canada,” he says, while other jurisdictions have embraced innovation much quicker. “The United Kingdom is ahead of its time, as is much of Europe.”
Just don’t look to the Ontario government to offer public auto insurance schemes of its own. Hands insists that government-run plans are costlier, since there’s no competition. Instead, he says Ontario is doing the right thing by working with the industry and weighing regulatory changes to eke out savings for consume
“It’s all about fostering a better relationship with the private insurers and providing regulatory transparency, which is in the best interest of everyone.”