Car Insurance Pricing - Why It Isn't A Fair System

Online, December 5, 2012 (Newswire.com) - The basic premise for any insurance - including auto insurance - is to provide consumers, everyday drivers with an affordable way to deal with uncertainty and possible disasters by sharing the risk among a large pool of like people who face similar concerns and risks. In car insurance coverage, the pool allows for insurance to be sold as a protection for car drivers against basic claims, accidents and the unfortunate unforeseen disaster cases, all designed and intended to protect the driver and family. Has Ontario car insurance drifted too far from this norm, making the system unfair to some?

If the unfortunate strikes and a car accident tragedy happens, no party involved in the car accident will suffer a catastrophic financial loss because the risk and cost of such an event is spread out over many insured car drivers, the "pool". The system is based on the notion that a catastrophe will only happen to a very small percentage of those in the shared pool. This basic concept of insurance has been in place for hundreds, if not thousands, of years and works very well for most forms of coverage. So if the system is essentially the same for consumers and drivers in others cities, towns and provinces across Canada, then why is Ontario car insurance, and particularly Toronto auto insurance so out of a normal acceptable range?

A quick analysis of car insurance across Canada in comparison showed exactly what had speculated: basic coverages and benefits paid for auto insurance is quite similar no matter where you live, with some exception (Quebec, as an example). These exceptions, when looked at more closely, have to do with car insurance being that are provided and highly regulated by the related provincial government. Is government auto insurance is superior to that offered by competitive private sector car insurance? For example, there is the notion that auto insurance in B.C., Manitoba, Quebec (on bodily injury) and Saskatchewan, where car insurance is largely provided by the government is less expensive and offers greater coverages and benefits compared to car insurance offered in Alberta, Ontario, New Brunswick, Newfoundland, Nova Scotia, and Prince Edward Island. Keep in mind this is not a conclusive result and is based on a few insurance expert's opinions.

Whether government or privately offered auto insurance, the basic product offering, coverages and benefits paid should remain consistent. The key factor in pricing the auto insurance premium should largely be related to the design of the insurance policy product offered.

If Ontario car insurance were on an equal footing, the key test applied should be that the primary, long term and core solution to the problem of rising auto insurance rates does rest on the hands of who supplies the product of auto insurance but rather in the key product design features and characteristics.

In Ontario, as identified by provincial government appointed Task Force, is the conclusion that that no matter what type of auto insurance model is structured for Ontario consumers, the heart of the problem of consistently higher and ever rising car insurance premiums in Ontario verses other provinces has been continuously identified as being due to the increase in bodily injury loss costs and accident benefits claims, far above the national average. Until Ontario rectifies this problem, auto insurance rates will remain higher than their provincial peers.

Car insurance: a fair system?