Auto reforms promised in Ontario

Sept. 22, 2022 — ONTARIO’s official opposition party has again called on the province’s Progressive Conservative government to end what it calls postal code discrimination in auto insurance premium rate-setting.

MPP Tom Rakocevic (NDP-Humber River- Black Creek) reintroduced a bill at Queen’s Park late last month to prohibit using postal codes to set premium rates — with a focus on the Greater Toronto Area.

The NDP first introduced such a bill four years ago but it did not proceed. Earlier this year, the same bill received unanimous support but died when the legislature was dissolved in May.

A representative from the Insurance Bureau of Canada said p&c insurers believe consumers deserve a competitive auto insurance market that accurately measures driver risk.

Media relations manager Brett Weltman noted that the location of where someone lives and drives is only one of many factors used to determine risk and premiums and that the current rules insurers are required to use are more than 15 years old and in need of modernization.

He said that while insurers would like to see the overall territory rating system updated, a prohibition on the use of postal codes may not be the best way to go about it.

“The proposed bill introduced by the NDP would make the entire GTA one territory, reducing accuracy in underwriting further and increasing premiums paid by a larger group of drivers,” he told Thompson’s earlier this month.

“This would not be a net improvement for industry or consumers.”

Mr. Weltman said the IBC believes it would be better to follow the approach taken in Alberta, which has moved from prescriptive to principles-based regulation of auto insurance premium rates.

“This provides more accurate rating for consumers and allows insurers to better compete for customers’ business,” he said.

He said insurers have been working with the provincial government to remove unnecessary costs from the system.

Ontario Premier Doug Ford said following his re-election in late June that basing auto insurance rates on postal codes will “come to an end.”

The provincial government subsequently reintroduced a budget it had presented in the spring which includes the development of a new framework for ensuring fairness in rate-setting that would include guidance on territorial rating.

It also promising to implement a new strategy for reforming the regulation of auto premium rates and to consult with the insurance industry to develop plans to combat fraud.

The bureau welcomed the reintroduction of those proposals and said the measures in the budget should lead to a better and more affordable auto insurance system.

(For more coverage of Ontario auto insurance and other Canadian p&c industry news and trends, please choose the ‘Subscribe’ tab on our main page or email for more information).