Car Insurance Costs More in Weston

Why is Car Insurance more expensive in Weston and Mount Dennis?

For some years now, people have been complaining about the cost of car insurance in Weston and Mount Dennis.  People have discovered that your postal code is one of the factors determining how much you pay.  Other factors are your age, your driving record, how much you drive, and your gender.

To get an idea of the postal code variations, Kanetix Insurance publishes a map on their website (https://www.kanetix.ca/insuramap) which colour codes Ontario with the base rates (before all the other factors) based on geography.  Rural and Northern Ontario get lower rates, understandably, because there are fewer vehicles.  Zoom in on the city of Toronto, however, and you will see wide variations in rates just a street away.  Weston is one of the highest rates, while places like Forest Hill and the Bridle Path are among the lowest.

Insurers when questioned by their clients will claim that higher rates where you live are caused by more frequent accidents in your neighbourhood.  It’s just not true.  I downloaded data from Toronto Police of accidents involving personal injury for the past 7 years.  You can see the map here https://drive.google.com/open?id=13f2Hj-S7f7r3pOGAlghbZfOIsvhPISnm

It shows that the only place with more frequent accidents is the downtown core.  Accidents are distributed quite evenly otherwise.

I met with the Insurance Bureau of Canada to try to get an explanation.  They told me that insurers base their rates on the ‘cost per collision’.  At the time (2011) the average cost per collision in Ontario was about $8,000.  The cost in York South – Weston was $30,000.  The annual insurance rate based on those costs was about 10% of the cost per collision.  So the average in Ontario was $800 per year while in York South -Weston it was about $2500.

Why are these costs so much higher in our neighbourhood?  We don’t drive more expensive vehicles.   We don’t drive faster (just try driving fast on our potholed streets).

It appears that the average income is what drives the rates.  I plotted the average incomes in Toronto from the 2016 census on a map.  https://drive.google.com/open?id=1pJIy3AhxQIipfzFO8hp-CtiyNWxHllsP  If you compare it to the Kanetix map, you can clearly see that where incomes are highest, car insurance is lowest.  And vice versa.

How is this possible?  When someone is injured in a collision, the insurer is obligated by law to provide income replacement and medical costs.  For persons with good employment and good benefits, they usually have sick leave and medical plans paid for by their employer.  So the insurer doesn’t pay until those employer benefits are exhausted.  For persons with precarious, low wage, service sector jobs, or those who are retired and on fixed incomes, there is less likely to be good sick leave or medical benefits paid for by the employer.  So when that person is in an accident, the auto insurer pays out.  Simple explanation.

In 2005 the regulator granted permission to the insurance companies to divide Ontario into 55 territories and Toronto into 10.  http://www.fsco.gov.on.ca/en/auto/autobulletins/2005/Pages/a-01_05.aspx  When they did this they specifically expressed concern about unintended consequences of such divisions.

“Auto Bulletin A- 1/01, issued by FSCO in February 2001, outlined the fact that in determining whether the statutory standard of “just and reasonable” is satisfied, the Superintendent considers societal fairness when reviewing risk classification systems, and not just actuarial soundness. One of the concerns from a public policy perspective is that if a territory is based on a small geographical area, even though densely populated, socio-economic factors may be influencing loss costs. In addition, drivers may operate their vehicles all over the city, so narrowly defined territories may not be logical. A limit on the number of territories that may be proposed is reasonable and would minimize rate differences due to socio-economic factors.”

It seems that their fears were justified, and socio-economic factors are influencing loss costs.  In turn the loss costs are driving rates higher.

The NDP put forward a bill that would have ended postal code discrimination in the GTA.  It was defeated.  The Conservatives have put forward a bill which would prohibit insurers from using postal codes as the ‘primary’ rate determinant.  Some have suggested this creates a huge loophole, as your age, gender and record are the primary determinants.

It doesn’t need an act of parliament to change this.  If the regulator gave permission, and socio-economic factors are clearly at play, the regulator can withdraw permission.  However, if rates go down in Weston, they will go up in Forest Hill and the Bridle Path.

Author: Mike Sullivan

Mike Sullivan has lived in Weston since 1992, with his wife Andrée and at various times their seven children. He has helped with or led community causes – protecting our street names from amalgamation, burying trains, getting a stop, getting bridges and noise walls, promises of electrified trains and lowered fares. He was a Union Representative working for NABET and CEP (now Unifor) dealing with broadcasters and newspapers. He ran for Member of Parliament three times; elected in 2011. While MP he helped deal with street crime by leading the charge to force phone companies to refuse to activate stolen phones. He was critic for persons living with disabilities, helping get disabilities listed as one of the ‘hate crime’ prohibitions. He presently serves as a member of the Board of Weston King Neighbourhood Centre, and of the advocacy group TTC Riders.

11 thoughts on “Car Insurance Costs More in Weston”

  1. It’s not just average income that drives rates. You’re correct that someone with good workplace income and medical benefits typically does not need to collect from their auto insurer, but a disproportionate driver of claims costs in Weston, at least historically, is pretty rampant insurance fraud. These run the gamut of faked accidents, exaggerated injuries, phony lawsuits, and crooked treatment clinics. The cost of adjusting and fighting these claims far outstrips most ordinary injury claims.

    As long as we’re pointing fingers, it was the NDP who first created this mess back in 1994 when they abolished the OMPP and passed bill 164, caving into labour unrest. Since then the auto insurance system in this province has functioned more or less dysfunctionally, with both other parties bearing their share of responsibility in equal measure.

    1. In fact, insurance fraud is said to be 2% to 5% of claims. Hardly explains a 70% increase in premiums in every low-income neighbourhood in Toronto (not just Weston).

      1. The 2-5% figure doesn’t accurately reflect the reality. I’m speaking from six years’ of experience as a lawyer specializing in fighting fraudulent insurance claims. Civil fraud is almost impossible to prove and most insurance companies don’t bother with it, because a failure to prove such claims can lead to significant bad faith damages against the insurer. Most fraudulent claims are simply settled out of court. Some years ago, one very large Ontario mutual company simply ceased underwriting in the GTA rather than deal with fraudulent claims costs. These fraudulent claims, however, have a disproportionate impact on claims as a whole.

        1. The insurance industry itself came up with that figure. Even if it’s 10 or 15% of claims costs, it doesn’t explain a 70% difference in rates. It also suggests that ALL of the fraud occurs in low income neighbourhoods. Does your litigation experience also suggest that fraud is only in low income places?

    1. As much as I agree that the system is discriminatory, if you ever need to make a claim and it’s discovered that you’re lied about something in your policy agreement, good luck with that.

      Even if you are someone who strives to have the cleanest driving record, you end up losing because of so many factors out of your control and they are applied based on things like gender, age, location, etc. Imagine the uproar if other things in life were like this. “Oh, you meet all the criteria BUT you’re this gender, or you’re that age, so we have a ‘special’ rate for you”.

      1. Weston gets the shaft again, yet folks like Worker Bee want to keep adding more “affordable” housing to Weston.

  2. Mike, good write-up. But you and I both know what the real solution is. It’s now buried deep in the NDP policy book: Public Auto Insurance, like they have in a number of other provinces. Hopefully the current, watered-down version of what passes for “Today’s” Ontario NDP will once again have the courage to embrace this idea. It would lower rates for everybody and be a political winner. Maybe our new MPP will run with it …

    Cheers.

    1. The only time the NDP ever held power in this province, they abolished the OMPP… Ontario’s public auto insurance provider.

      It’s easy to be idealistic from a position of irrelevance.

      Incidentally, I happen to agree with you.

  3. Thanks for this analysis, and all the background work you share. We need change, and to disentangle so many things from the profit for the corporations model.

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