The latest promise from some of our political parties is that, if elected, they will force auto insurance companies to lower insurance premiums by making them put an end to rating consumers via their postal code, or as they call it Postal Code Discrimination against the Greater Toronto Area (GTA). Lower insurance rates is something the residents of the GTA have been requesting for a while. We would all like to pay less car insurance, however for those of us living in Eastern Ontario and rural communities, the end to rating via postal code will not affect us in the same way.
As it stands our auto premiums are based off of three variables;
1. Your Driving Record – Your age, gender, driving and insurance experience, tickets and At-Fault accidents as well as Cancellations for Non-Payment all contribute to your Driving Record and subsequent insurance premium. Those with less driving experience or have a ticket or two will likely pay more in premiums compared to the exact same person with more years of driving or with no tickets.
2. The car you drive – Each year, make and model of car has its own CLEAR* rating which assess how likely that vehicle is to be involved in a claim, the cost of repair and the likelihood of it being stolen. A higher CLEAR number indicates a higher claims risk. A lower CLEAR number indicates a lower claims risk which is reflected in lower insurance rates.
3. Your Postal Code – Where you live just doesn’t factor in your personal address but also includes the number of intersections, traffic lights and signs, auto theft and auto fraud statistics. If you live in a highly populated area with more vehicles on the road and busier intersections, you have a higher probability of being involved in an auto accident than if you resided in a less populated area.
Kanetix have created InsuraMap (https://www.kanetix.ca/insuramap ), an excellent tool to assess the average car insurance rates across the province. We invite you to review the map and note how much of the province would be affected if rating via postal code was no longer applied and the GTAs higher premiums were spread out. Insurance companies do not intend to have a loss of income, they will recoup the lowered GTA premiums from the rest of the province.
We have the benefit of having some of the lowest claims costs in the province and because of that we are charged some of the lower rates in the province for our auto insurance. With political parties vying for votes in urban areas, they are pushing Postal Code Discrimination without considering how negatively it will affect the voters in the rural areas where there are more seats to be won.
Currently our rates can be 50% lower than in certain postal codes in the GTA. With ending the use of postal codes as a rating tool could mean a 20-30% increase in the auto insurance rates we pay to subsidise the insurance premiums of the higher risk areas in the province.
McDonell Levert Insurance does not intend to be political, however we are an insurance brokerage in an Eastern Ontario rural community and we do not feel our fellow residents are being clearly informed by the media about how negatively the end to Postal Code Discrimination will affect their insurance premiums and wallets.
Resources and references:
Insurance Bureau of Canada – http://www.ibc.ca/pe/auto/buying-auto-insurance/how-auto-insurance-premiums/clear
*Canadian Loss Experience Automobile Rating