Why Do Ontario Residents Pay The Highest Auto Insurance Rates?

If you drive in Canada, you are required to carry auto insurance. The sad reality is that it doesn’t come cheaply, especially for residents of Ontario. Why is it that those who live in Ontario pay the highest rates in Canada for auto insurance? And is it warranted, or is it based on discriminatory policies? The average Ontario resident pays as much as $1500 a year for auto insurance, which is nearly 45% more than those who reside in Alberta, which has the second most expensive rates in Canada. Making matters worse, if you are male between the ages of 16-24, the cost for insuring yourself is out of the realm of reasonable.

The reason Ontario residents pay so much more rests in the fact that the claims in Ontario are plagued by fraud. MPI insurance brokers claim that to insure males in Ontario is far riskier than anywhere else in Canada. But is that real, or is it just a construct of the insurance company to justify charging more?

Private insurers insist that the rates of traffic violations are so much higher in Ontario that it is a justification to why they have to charge so much more.

But public insurers aren’t saying the same thing. According to public insurance programs, those who drive in Ontario are not that much riskier statistically than other provinces in Canada. Although the rates are based on what the insurance industry insists is “statistically” evident, not everyone is onboard with those rate hikes. The difference between Ontario and other provinces resides in the fact that there are more “high-risk” neighborhoods in Ontario, and so the insurance companies insist that they have to charge more to insure young men who drive.

The reality is that when you look at the studies and the statistics, there is really not a difference between drivers in Ontario versus other places. Drivers between the ages of 16 and 24 only make up approximately 13% of the driving population in Ontario, but they account for 24% of all motor vehicle fatalities, and 26% of those with serious injuries – but that doesn’t differ much from the statistics in the rest of Canada.

So what is it about Ontario?

It isn’t as much about the crash rate of men within the group of 16-24 in Ontario when compared to other regions; it is more about the road conditions and the high rate of theft experienced in Ontario versus other parts of Canada. It is also about the limitation of only having two sources of financial servers that fund insurance companies. Because there aren’t many options for insurance in Ontario, like there are in other regions, it limits competition and allows insurance companies to hike rates without worrying about losing clients.

The real question is which is better for the consumer, private or publicly controlled insurance? When it comes to public insurance, there aren’t many options, and people are beholden to a set price. But for privately-owned insurance companies to exist, they have to have competitive pricing structures. In Ontario, there aren’t enough insurance companies vying for the customers for them to lower prices, which means that the residents are forced to pay whatever they have to in order to be able to legally drive.

The reality is that if there were more privately-owned insurance companies in Ontario fighting for the consumer, then the average Ontario resident – especially those who are considered high-risk – would have more options for coverage. But to date, those who drive either have to use public insurance, which has that set price or they only have a few options for private insurance.

So, although insurance companies might claim that the high insurance costs in Ontario are justified, the reality is that those rates are driven by a lack of options and drivers being stuck with paying for insurance that is limited and determined by no options and no competition. Until more private companies make their way into the Ontario market, residents will continue to pay more whether their driving habits are riskier or not.

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