Auto Insurance

Ontario bill to end ‘postal code discrimination’ struck down

By: Lisa Coxon on November 6, 2018

A bill that sought to end Ontario’s postal code system for car insurance was struck down in the Ont. legislature last week.

Gurratan Singh, NDP MPP for Brampton East, tabled Bill 44, the Ending Automobile Insurance Discrimination in the Greater Toronto Area Act, in October. Its aim was to prevent the use of territorial ratings when it comes to auto insurance premiums — often referred to as “postal code discrimination.” The bill intended to prevent the Financial Services Commission of Ontario from allowing auto insurance providers to base premiums on geographic region within the GTA.

Under the bill, the GTA would have been defined as the city of Toronto, as well as the regional municipalities of York, Durham, Peel and Halton. That would mean that the GTA could have come to include Milton, Oakville, Mississauga, Oshawa, Richmond Hill, Newmarket and Markham.

Most importantly, it would have included Brampton, a city where residents have long complained that they pay the highest car insurance rates in Canada.

But last Thursday, politicians voted 35-24 to quash the bill.

Postal-code discrimination is receiving a lot of attention in the political sphere — even from opposing parties. In October, Singh and Progressive Conservative MPP Parm Gill, who represents Milton, each spoke about introducing separate private member’s bills that would seek to lower auto insurance rates in Brampton.

For the insurance industry, postal codes are significant predictors of risk. Insurers look at how many claims have historically been made in an area — accidents, vehicle break ins — and use those as a predictor of how many may happen in the future. A small town, for instance, will likely have lower premiums than a dense city neighbourhood — because there are likely fewer accidents. (To put that into perspective: My sister and I both bought new vehicles earlier this year. I live in Toronto and pay around $2,209 annually to insure mine. She lives in a small town of fewer than 1,000 people, and pays $1,068 a year to insure hers.)

But, as Singh told Canadian Underwriter, “That argument doesn’t make sense within the boundaries of the GTA.” Places like Brampton and Scarborough are hit with some of the highest rates in the province.

During Thursday’s debate on Bill 44, backbench Progressive Conservative MPP for Scarborough Centre, Christina Maria Mitas, spoke strongly of the need to lower premiums. “According to a 2017 report on the most expensive rates in Toronto, Scarborough tops the list with nine neighbourhoods paying over $2,000 a year,” said Mitas, “making it one of the most expensive neighbourhoods in this city. We cannot afford our rates to go higher.”

So, where do things stand now? Well, drivers in Brampton and Scarborough can expect to keep paying higher annual premiums than the rest of Toronto as the efforts to do away with territorial ratings continue.

Progressive Conservative MPP Parm Gill’s Bill 42, the Ending Discrimination in Automobile Insurance Act, is still before the legislature. It goes one step further than Singh’s bill, and proposes a province-wide ban on insurance industries using postal code and telephone area codes as rating factors in determining people’s premiums.