Auto insurance changes coming in Ontario budget: sources
Auto insurance changes coming in Ontario budget: sources

Auto insurance reforms will be introduced in Ontario's budget on Tuesday, multiple sources told CBC News.  Sources say the changes will offer drivers more options to reduce their car insurance premiums.  (Evan Mitsui/CBC – image credit)

Auto insurance reforms will be introduced in Ontario’s budget on Tuesday, multiple sources told CBC News. Sources say the changes will offer drivers more options to reduce their car insurance premiums. (Evan Mitsui/CBC – image credit)

Ontario Premier Doug Ford’s government will make auto insurance changes a central feature of the budget it presents Tuesday, CBC News has learned.

Multiple industry sources familiar with the government’s plans say the budget will include reforms that give Ontario drivers a wider variety of options to lower their auto insurance premiums.

A spokesman for Finance Minister Peter Betlenfalvi would neither confirm nor deny the plans.

“The government is always looking for ways to increase consumer choice, cut red tape and make car insurance work best for consumers,” the spokesman said in an email. Betlenfalvi is due to present the budget on Tuesday afternoon.

This will be the Ford government’s second major attempt at auto insurance reforms. Her 2019 budget included a program called Putting Drivers First, which then-Finance Minister Vic Fedelli said would be transformative.

It is far from clear that these reforms have succeeded in keeping interest rates low. According to the Ontario Auditor General, the average auto insurance premium has increased by nearly 14 per cent from 2017 to 2021.

Ontario Premier Doug Ford and Finance Minister Peter Betlenfalvey are pictured during a press conference announcing the provincial government's plan to allow the sale of alcohol in convenience stores at a Circle K convenience store in Toronto on December 14, 2023.

Ontario Premier Doug Ford and Finance Minister Peter Betlenfalvey are pictured during a press conference announcing the provincial government’s plan to allow the sale of alcohol in convenience stores at a Circle K convenience store in Toronto on December 14, 2023.

Ontario Finance Minister Peter Betlenfalvey, left, will present the province’s budget on Tuesday. It will be his fourth budget since Prime Minister Doug Ford appointed him to the post in 2021. (Alex Lupul/CBC)

The auditor reported in 2022 that Ontarians pay the highest average auto insurance premiums in the country. Since then, rates in Canada have increased further due to a combination of inflation, rising car thefts and supply chain problems caused by the pandemic. Forecasts call for further premium increases in 2024.

During the 2022 election campaign, Ford’s PCs promised “changes that will, over time, give consumers more choices when buying auto insurance.”

More freedom to choose coverage

The proposals that will go into Tuesday’s budget will be largely consistent with the campaign promise, industry sources said. CBC News is not naming the sources because they were not authorized by the government to speak about the measures.

The sources say the budget will not include a specific target to reduce average car insurance premiums across the board. Instead, the measures will increase what the industry calls “optionality” for customers, allowing drivers more freedom to choose their coverage plan, one source said.

Auto insurance premiums rose sharply after falling slightly as fewer drivers were on the road during the COVID-19 stay-at-home restrictions, says John Shmuel, managing editor of rates.ca, a website that offers price comparisons of car insurance and other financial products.

“Inflation has started to grow throughout the auto insurance system. Insurers have started to see that repair prices are really starting to go up,” Shmuel said in an interview.

John Shmuel is the managing editor of rates.ca, a website for comparing financial products such as home insurance, auto insurance and mortgage rates.

John Shmuel is the managing editor of rates.ca, a website for comparing financial products such as home insurance, auto insurance and mortgage rates.

John Shmuel is the managing editor of rates.ca, a website for comparing financial products such as home insurance, auto insurance and mortgage rates. (CBC)

He said offering drivers a wider range of options to lower their premiums is great in theory, as long as they are given adequate information about the potential consequences of less coverage.

“Insurance prices in Ontario can be lower on average,” Shmuel said.

“We can make the market more competitive, we can invite more competition so more insurance companies are involved here so customers have more options.”

Auto insurance rates have often become a hot political issue in Ontario over the years. Official statistics from the provincial regulator cited by the auditor general show premiums have risen more than inflation since 2022.

Kathleen Wynne’s previous Liberal government promised in 2013 to cut car insurance prices by 15 per cent within two years, but failed to meet that target.

The Ford government’s 2019 reforms have increased choice by allowing insurance companies to offer drivers new types of discounts. These options include lower premiums for drivers who agree to claim benefits only through an insurance company’s “preferred providers” for auto repair or health services.

On January 1, 2024, Ontario began allowing drivers to opt out of previously mandatory coverage called “direct indemnity — property damage,” which reimburses drivers for damage to their own vehicle in an accident that was not their fault.

The truck first collided with that black car before crashing into several others, police say.

The truck first collided with that black car before crashing into several others, police say.

Auto insurance premiums in Ontario fell after fewer drivers commuted during the COVID-19 stay-at-home restrictions, but have since risen above pre-pandemic levels. (@OPP_HSD/Twitter)

Car theft plays a role in premiums

Recent national and regional summits have drawn attention to the role that rising car thefts are playing in driving up car insurance prices.

The Insurance Bureau of Canada, which represents insurance companies, says auto theft claims across the country will reach $1.2 billion in 2022, triple the amount in 2018.

Last November, the Ford government committed $18 million over the next three years to fund police projects designed to combat car theft, while police forces came together to set up a car theft task force.

Another key factor in Ontario car insurance rates is the home address of the registered owner. There are significant differences in premiums for drivers with identical cars and identical driving histories but who live in different places, which some have called “postal code discrimination.”

The 2022 Ontario Auditor General’s report found that annual premiums ranged from $1,200 in London to $3,350 in Brampton for otherwise identical insurance coverage.

None of the industry sources could say whether Tuesday’s budget changes would have an impact on geographic differences in insurance rates.

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