NDP bill would ban territory as auto insurance rating factor

Insurance Bureau of Canada (IBC) is urging Ontario MPPs to vote down an NDP private member’s bill that would ban the use of territory as a rating factor in auto insurance.

Any reduction in premiums for constituents in some areas of the province would become an expense for drivers elsewhere, notes an open letter released yesterday by Ralph Palumbo, vice president of IBC’s Ontario division.

If given the green light, the bill would dramatically alter the way auto insurance premiums are calculated in Ontario, Palumbo states. All MPPs – and, in particular those representing northern and rural constituencies – should vote to defeat the bill during second reading on June 7, the letter adds.

“There is a serious problem with claims costs in the south, not the north,” Palumbo writes. The reason that southern Ontario drivers pay high auto insurance premiums, he explains, is because it costs more to underwrite insurance in those communities.

In the Bramalea-Gore-Malton riding in southern Ontario, for example, the average premium is $1,914 a year and insurers repaid $2,981 per vehicle in claims, Palumbo notes. That compares to an average premium of $1,053 in Sault Ste. Marie because the per vehicle claim cost is only $981.

Claim costs do not include insurance company operating expenses such as salaries, overhead, taxes and health care levies, he adds.