Canadian Underwriter

How promises to eliminate territorial auto rates will divide urban and rural voters

May 24, 2018   by Greg Meckbach

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When Ontarians go to the polls June 7, they will likely vote for a party with at least some members who promise to put an end to territorial ratings in auto insurance.

This poses a problem for the property and casualty insurance industry because some insurers are saying territory is “the most effective indicator of whether someone will have a claim and how much it will be,” said Joseph Carnevale, associate broker and director of sales for Brokers Trust Insurance Group Inc., based north of Toronto in Concord. Carnevale is also director of Territory 10 (Metropolitan Toronto and York region) at the Insurance Brokers Association of Ontario.

The ruling Liberals promise to “eliminate geographic discrimination in auto insurance,” a party spokesperson told Canadian Underwriter this week.

The New Democratic Party promises to do the same, claiming that using postal codes as a rating factor discriminates against poor people.

Progressive Conservative Finance Critic Vic Fedeli told Canadian Underwriter in 2017 that if elected, the PCs “would direct” the Financial Services Commission of Ontario “to stop accepting postal codes as a factor in setting insurance rates.”

Fedeli made the statement when he was interim leader of the PCs last year, after Patrick Brown resigned as the party leader. Brown was replaced in March by Doug Ford, who has not publicly said whether or not he would eliminate territory as a rating factor.

“There is some ambiguity, I believe, about the Progressive Conservative Party platform,” Carnevale told Canadian Underwriter Wednesday.

There is some recognition in political platforms that insurance premiums in the GTA, and in some ridings in particular, seem high to the average person. More specifically, there is some concern about high rates that insurers charge to vehicle owners living in Brampton, Mississauga, and Vaughan.

“Ironically insurance companies tell us that … where that car resides has the biggest impact on their ability to forecast whether or not there will be claims and how much those claims will be for,” said Carnevale, adding that he’s heard from insurers that territory is an even better predictor than factors such as vehicle make.

Explaining how the territorial rating works, he cites the hypothetical example of a town in which only one resident has a car. That motorist would be less likely to get into a collision than a motorist in a city where there are 500,000 other vehicles, Carnevale reasoned.

“Just look at the 401,” he said of the Greater Toronto Area. “The traffic is an indication of how many cars are on the road. Clearly anyone can see that if you are in an area where you have that many cars, then the likelihood of accidents is far greater than areas where you don’t have that many cars.”

So eliminating territory-based rating would make all insurance premiums equal across territories. This would give GTA motorists a break, lowering their rates. On the flip side, however, rates would likely increase for people in less densely-populated areas, whose rates would now be on par with the rates of people living in urban areas.

“I don’t think any of the candidates in the provincial election are looking for a rural versus urban political argument,” Carnevale said.

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3 Comments » for How promises to eliminate territorial auto rates will divide urban and rural voters
  1. ted j says:

    You know what Liberals promised before 2014 elections….he whole 15% and one know what happen…………

  2. Mica says:

    In this day and age of big data and loss correlation, it is a given that Address (post code), vehicle, driving history, and yes credit score has been proven, are all indicators of loss.
    Removing territory is nothing, clear and simple, but a political hack to garner votes from GTA at the cost of others who have better claims ratios.
    Utterly ridiculous that Ontario would consider such a backward “un-data” policy punishing safer drivers.

  3. Carrie says:

    Politicians in Ontario only care about Toronto because that’s where most of the population and voting will take place.
    They have no idea how insurance works

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