Bad Ontario drivers pay Canada's highest insurance rates

If you are a bad driver in Ontario on average you will pay 21 per cent more for automobile insurance and the highest rates overall in Canada,  according to a recent study.

Many factors are taken into consideration when you get a car insurance quote including your age, the value of the vehicle and your driving experience. But your driving record is a key variable.

To determine how exactly a bad driving record impacts your premiums, InsureEye collected data from over 1,000 Canadians including 600 from Ontario.  Survey participants were asked how much they pay for monthly car insurance premiums and to place themselves in one of three categories:

• No violations within the last six years (excluding parking tickets).
• Maximum two violations in the last three years.
• More than two violations in the last three years, or licence suspension in the last six years.

It turns out that Ontario drivers are comparatively quite safe, with 84 per cent claiming they had no serious violations within the last six years and just 1 per cent reporting more than two violations in the last three years, or licence suspension in the last six years. Only British Columbia (87 per cent) has a higher share of drivers with clean records.

On average, monthly premiums in Ontario are $148/month with the safest drivers paying only an average of $143/month. In contrast, drivers who had up to two violations in the last three years paid an average of $173/month. That’s $450 or 21 per cent more a year than drivers with a clean record. Because so few people fall into the worst group of drivers, no premium differential was calculated for Category 3 above.

Related: Ontario car insurance: good news and bad news

In contrast, auto insurance is cheapest in Alberta (average monthly premiums of $113) and the spread in premium costs between the best drivers and those in the second category above is 19 per cent.

In a report filed at the end of last year, Ontario Auditor General Jim McCarter identified several reasons why auto insurance rates in this province are the highest in the country.

•  The average injury claim of  $56,000 in Ontario is five times more than the average claim in other provinces.
• Ontario’s coverage is the most comprehensive, with the highest benefit levels in the country. This is in spite of fall 2010 benefit reductions for minor injuries.
•  Industry estimates peg the value of auto insurance fraud at between 10 per cent and 15 per cent of the value of 2010 premiums, or as much as $1.3 billion.

Another problem identified by the auditor-general is that in this province auto insurance company profits are way out of synch.

The Financial Services Commission still allows insurers a 12 per cent rate of return based on long term bond rates in 1996. However the profit margin has not been adjusted downwards since that time, although the long term bond rate has been about three per cent for the last several years and is projected to remain at a relatively low level for some time.

It makes sense for bad drivers in any province to be charged higher premiums. However, I agree with Toronto Star columnist Ellen Roseman that the cost of insurance premiums should have been an issue in the Ontario fall 2011 election and for what we pay, there is considerable room for improvement in our accident benefits system.

Related: Roseman: Car Insurance should be election issue

              Roseman: Why our accident benefits system may be the worst

One of McCarter’s recommendations is that the Financial Services Commission examine cost containment strategies in other provinces to determine which could be applied in Ontario to control this province’s relatively high claims costs and premiums.

Seems to me someone should have thought of that one long ago. What do you think?

To compare your auto, life and home insurance costs with your peers, see InsureEye Peer Comparison.

Contact Toronto lawyer and writer Sheryl Smolkin through her website  Follow her on Twitter @SherylSmolkin.