Why did auto insurance rates go up in some Ontario communities?

While auto insurance premiums across Ontario dropped an average of 3.8% last year from 2020, certain areas saw single- or double-digit increases, according to a recent report from rate aggregator Ratesdotca.

The cities of Nobleton, Schomberg, Orangeville and King City, which tied for 10^th place in the top ten most expensive cities in the province, saw increases of 14.2% year-over-year. Oshawa saw a 12.1% increase.

Other cities, namely Napanee, Trenton, Port Hope, Cobourg, Belleville and Picton, saw average increases of 6.5% from 2020 to 2021, data from Ratesdotca’s Auto Insuramap show. But these cities also pay nearly $400 less per year that the 2021 Ontario auto average of $1,555 at $1,175 (including the village of Kendal, which saw its premiums drop 7.6% year-over-year).

So, while they rounded out the bottom of the provincial ranking, why did these communities (with the exception of the village of Kendal) see rate increases? It could be correlated to the migration of city dwellers to the country, says Ratesdotca insurance expert and chartered insurance professional Tanisha Kishan.

“Because of remote work, people started moving a bit farther out and the number of cars on the road could have increased slightly,” she says, adding that more data is needed to be able to conclude that definitely. More likely, drivers in these communities maintained similar commutes.

It’s also possible that driving habits in certain areas weren’t as heavily impacted by the pandemic as they were in the Greater Toronto Area, Kishan says in an interview. Toronto drivers saw significant decreases, as did suburban drivers who commute to the city for work. The average annual premium for Toronto including its suburbs was $1,952 in 2021, 11.3% lower than the 2020 premium of $2,200.

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Canadian Underwriter also asked if there were other possible explanations other than postal code as to why places like Nobleton, Schomberg, Orangeville and King City and Oshawa saw double-digit rate increases.

“During the pandemic, many people moved from urban areas to rural areas. The resulting increase in population in some areas correlates to higher traffic density and could potentially drive up rates,” Kishan says. “As communities grow, it isn’t unusual to see rate fluctuations.”

She notes that aside from postal codes, many other factors determine auto insurance rates, including:

• Individual characteristics such as age and gender;
• Vehicle characteristics such as year, make and model;
• Vehicle usage (business versus pleasure);
• Annual kilometres driven;
• Years a driver has been licensed and insurance history;and
• Loss history, including prior claims and tickets.

Ratesdotca’s report also found Vaughan was the most expensive Ontario city for auto insurance in 2021, with estimated annual insurance premiums of $2,179. Brampton, the former title holder, is now in fourth place averaging $1,976 a year, nearly 27% cheaper year-over-year. In nearby Toronto, the average annual premium for the city and its suburbs was $1,952 in 2021, 11.3% lower than in 2020.

Ratedotca’s estimates are based on a 35-year-old driver of a 2018 Honda Civic with a clean driving record.

But perspective is everything when it comes to swings such as the 12.1% in Oshawa and 14.2% in other Ontario cities.

“On the surface, these swings in quotes appear significant, but we must remember there is a stark difference between ‘quotes generated’ and ‘premiums paid’,” an Insurance Bureau of Canada spokesperson says. “If there are a few outlier quotes built into the analysis, they will certainly skew the averages and make it appear rates are significantly higher or lower. The average of several quotes does not necessarily reflect the actual premiums paid – drivers often select the most-affordable quote, not the average.”

Applied’s Rating Index found that average for premiums paid for auto insurance in Ontario decreased by 4.5% in Q3 2021 compared to Q3 2020.

It’s hard to predict how auto insurance rates will trend in the future. If driving habits and patterns return to what was seen pre-pandemic, it’s likely that rates will start to increase again, Kishan suggests.

Feature image by iStock.com/jimfeng