Ontario NDP Says Car Insurance Rates are Too High

By: Justin Leung on December 5, 2012

Ontarians are paying more for auto insurance than they should be, according to members of the Ontario NDP.  The party has recently become involved in a dispute with the Insurance Bureau of Canada (IBC), arguing that recently implemented insurance reforms should be lowering premiums.  On December 3rd the NDP reported that the cost of insuring a driver in Ontario has fallen 25%, yet insurance companies have actually raised premiums by 5%.  The IBC responded to the claim by saying the NDP was cherry picking data, and that a combination of delayed claims processing along with increased levels of fraud paints a much different picture.

The NDP used data from the insurance industry’s own records in 2010 and 2011 to conduct its research.  In the data they found the average cost to insure a vehicle fell from $1,274 to $984 year-over-year, but premiums paid by drivers increased from an average of $1,430 to $1,505.  The numbers also suggest the volume of paid out claims fell by an astounding 50 percent to just under $2 billion, which the NDP says helped car insurance companies pocket $3.4 billion in profit from insurance premiums.

However, IBC Ontario Vice President Ralph Palumbo accuses the NDP of playing politics by using what he says is flawed data.  He calls out NDP consumer affairs critic Jagmeet Singh for misleading Canadians on the matter. “While there is some truth to his simplistic math, the story he tells is far from complete.”

The IBC says the 2010 insurance modifications are still backlogged at the Financial Services Commission of Ontario (FSCO), the agency which processes car insurance claims.  They maintain that the data has yet to reflect all of the reforms to the system.  In addition, more claims cases are now going to court, which further delays final claims numbers.  The IBC also blames premium increases on fraud, arguing it costs the industry $1.56 billion a year, which in the GTA alone adds an extra $240 to $540 to each insured vehicle.

Despite these counterclaims, important questions remain on just how transparent the auto insurance industry is with its rates. Both parties admit that Ontario drivers pay higher car insurance rates than drivers in other provinces, despite the provincial government’s investments in infrastructure, road safety programs, and commitments to crack down on fraud.

The dispute will no doubt be a hot political topic in the coming months. Meanwhile, Ontarians will continue to see their car insurance rates increase with little explanation as to why.