Canadian Underwriter

Legislature defeats bill quashing territorial ratings in Toronto area

November 5, 2018   by Greg Meckbach

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If you have clients living in Brampton or near the intersection of Jane St. and Finch Ave., they will probably continue paying more for auto insurance than if they lived elsewhere in the Greater Toronto Area.

A bill proposing to make the GTA one single territory – for the purpose of determining motorists’ insurance premiums – has been defeated in the Ontario legislature.

“Within the GTA, we see huge disparity in rates,” Gurratan Singh, the auto insurance critic for the opposition New Democratic Party, said in a recent interview with Canadian Underwriter.

Singh – MPP for Brampton East – tabled last month a private members’ bill prosing to prevent the Financial Services Commission of Ontario from approving an application made by any auto insurance company that is based on geographic region – within the GTA. Bill 44, the Ending Automobile Insurance Discrimination in the Greater Toronto Area Act, was defeated this past Thursday 35-24.

One rationale for using postal codes as a rating factor is that a client who lives in a small town with little traffic is at less risk of an accident than someone living in a large city.

“That argument doesn’t make sense within the boundaries of the GTA,” Singh told Canadian Underwriter.

Bill 44 defined the GTA as the city of Toronto plus the regional municipalities of York, Durham, Peel and Halton. So the GTA includes the towns and cities of Milton, Oakville, Mississauga, Oshawa, Richmond Hill, Newmarket and Markham, among others.

Politicians who voted Nov. 1 against Bill 44 included Christina Maria Mitas, backbench Progressive Conservative MPP for Scarborough Centre. She said her constituents are paying “higher-than-average” auto insurance rates.

“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, making it one of the most expensive neighbourhoods in this city,” Mitas said Thursday during debate on Bill 44. “We cannot afford our rates to go higher.”

A second bill taking issue with territorial ratings is still before the legislature and goes even further than Singh’s bill.

Bill 42 proposes to ban – provincewide – the use of rating factors that are “primarily related to the postal code or telephone area code.” Bill 42  – the Ending Discrimination in Automobile Insurance Act –  was tabled Oct 15 by backbench Progressive Conservative MPP Parm Gill.

If passed into law, this would be “a great way to combat rate discrimination in our auto insurance system,” Finance Minister Vic Fedeli said Oct. 25 during Question Period. Fedeli did not go so far as to promise he would actually vote in favour of Bill 42.

While serving as interim leader of the PC party last year, Fedeli said the PCs would direct FSCO “to stop accepting postal codes as a factor in setting insurance rates.” But this changed after Doug Ford was elected this past March to lead the PC party, whose leadership has not made a definitive statement as to whether or not they support territorial ratings.

Using territory is “a significant predictor of geographical risk and risk in general,” The Co-operators General Insurance Company said in its management discussion and analysis of its financial results for the third quarter, released Oct. 25.

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7 Comments » for Legislature defeats bill quashing territorial ratings in Toronto area
  1. Craig says:

    What a load of …….never had an accident in 25 years of driving but just because I live in Brampton because I also work here I have to pay through the nose?? My record should determine my rate period.

    Bring back at fault insurance, make those who are the problem pay for their actions

    • Bob says:

      Rates are determined by a combination of so many factors…where you live is just one small piece. Insurance is based solely on statistics…they need to predict who will have an accident based on those factors. So yes, if you drive in an area where there are more vehicles on the road you should pay more as there’s a greater likelihood of an accident occurring….

      As for no fault legislation, it was brought in to cut court and legal costs….

  2. Muhammad says:

    Absolutely agree with Craig.

  3. Ryan says:

    Really ridiculous – i agree with Craig – why pay for the idiot drivers out there??? and such astronomically high rates!!

  4. Ian says:

    The issue is predictive risk versus demonstrated risk. If we ban rates based on where a person lives (not even a prohibited ground of discrimination) should we not also ban rates based on a person’s age or gender to be consistent?

  5. MP says:

    Territory/ area rating also includes that area’s claim statistics. If a particular area has higher claim costs, this will be reflected in the rates that area pays. If territory/area is removed as a rating factor, then other areas, which have had lower claim costs, will then be subsidizing those areas with higher costs. It’s all about the numbers. In all the articles I’ve read on this issue, I’ve yet to see statistical claim information posted for these higher rated areas. I’m guessing that might be counter-productive to those complaining.

  6. Dawn says:

    Rating by postal code for Section C coverage has been common in AB for years. It is not uncommon for someone living in Calgary or Edmonton (the two highest rate groups in AB) to be paying $2,000 or higher depending on their vehicle, driving history and coverage they select. The ON market has been subsidized for so long on the property and auto rates. I work for a company that is across Canada and when we compare the ON rates to AB they are less than half! Rate accordingly and you won’t have as many issues and insurers wanting to pull out of the auto market.

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