The good news and bad news about Ontario auto

Ontario auto insurance rates were 3.7% lower in the second quarter of 2020, than in the same period in 2019, but were still higher than in the three months ending March 30, 2020, data released Tuesday by LowestRates.ca suggests.

“COVID itself is suspected of driving up prices in Ontario,” LowestRates.ca said Tuesday of a 2% increase, in the average rate quoted, in the second quarter this year compared to Q1.

COVID-19 was declared a pandemic March 11 by the World Health Organization. Within days, various Canadian jurisdictions imposed unprecedented travel restrictions and business closures.

“Commuters abandoned public transit in favour of private transportation, driving up automobile sales and demand for insurance coverage,” LowestRates.ca said Tuesday in a release announcing its Auto Insurance Price Index Report 2020.

Drivers with a long break in their auto insurance history, or no history at all, accounted for 29.7% of LowestRates.ca users from Ontario in the second quarter. Those types of drivers generally pay more for coverage than current or recent drivers.

“Insurers have several concerns about motorists applying for auto who have no insurance history or a long break because there is not enough information to decide how risky you are,” said Justin Thouin, co-founder and CEO of LowestRates.ca, which generates home and auto leads for brokers and direct writers.

LowestRates.ca’s auto insurance price index — at 100 in Q1 2019 — tracks trends in rates by quarter, for Alberta, Ontario and Atlantic Canada.  The company gets its data comes from its own insurance quoter, which millions of Canadians use each year to compare rates.

From Q2 2019 to Q2 2020, the average rate rose 22.7% in Alberta and 14.1% in Atlantic Canada.

In Ontario, the index was 108 in Q2 2019, then dropped in each quarter to 102 in Q1 2020. It then rose back to 104 in Q2 2020.

Some motorists who did not drive at all because of the pandemic are choosing to buy only comprehensive coverage, meaning they are still protected from fire and theft, Thouin told Canadian Underwriter Wednesday.

“If you go from full coverage to just comprehensive because you are not driving your vehicle, that does not count as a break. Even if you stop with your insurance for a couple of years, but you have a long history before that, you typically won’t be penalized for that either.”

In its most recent insurance index price report, LowestRates.ca reported rate changes, by gender and age group, from Q2 2019 to Q2 2020.

In Ontario, the average rate was:

• Down 3.8% for men;
• Down 4.2% for women;
• Down 1.1% for the 18-24 age group;
• Up 4.2% for the 25-44 age group; and
• Down 4% for the 45-79 age group.

“Ontario drivers should expect insurance rates to remain high for the long term,” LowestRates.ca said Tuesday.

In Ontario, the Financial Services Regulatory Authority uses loss trend benchmarks to judge whether the rate changes proposed by insurers in their filings are just and reasonable. FSRA numbers released this past May show that overall claims expected to increase 2.4% a year. That is lower than the previous loss trend rate of 5.2%.

Despite a decline in the expected future loss costs bodily injury and accident benefits, the growth in the cost to repair vehicles is expected to continue, FRSA executive vice president Tim Bzowey wrote in the regulator’s newsletter released this past June.

Feature image via iStock.com/Evgen_Prozhyrko