Should where you live affect your auto insurance rates?

By HUB SmartCoverage Team on February 28th, 2019

A good idea? The answer depends on who you’re talking to.

Bill 42 proposes to ban – provincewide – the use of rating factors that are “primarily related to the postal code or telephone area code.” The bill, called Ending Discrimination in Automobile Insurance Act– was tabled Oct. 15, 2018 by backbench Progressive Conservative MPP Parm Gill. It is now awaiting second reading in the legislature.

The bill seeks to evaluate drivers based on their driving record and not where they live. In other words, if you’re a good driver, you should pay less. Several of the province’s politicians – across party lines - find using where a motorist lives to determine their auto rates a practice that is unfair.

If passed into law, this would be “a great way to combat rate discrimination in our auto insurance system,” said Progressive Conservative Finance Minister Vic Fedeli during Question Period Oct. 25.

While serving as interim leader of the PC party last year, Fedeli said the PCs would direct the Financial Services Commission of Ontario “to stop accepting postal codes as a factor in setting insurance rates.” But after Doug Ford was elected as leader of the PCs this past March, there has not been a definitive statement on whether they support territorial ratings.

Using territory is a predictor of geographical risk and risk in general. Many insurers consider where a car is parked at night to be a significant predictor of risk. One rationale for using postal codes as a rating factor is that a client who lives in a small town with little traffic is at less risk of an accident than someone living in a large city.

It should be noted insurers also use a driver’s age, gender and other factors such as length of time a driver has been licensed, whether the person has taken driver’s education and whatever driving convictions may be on their record to determine rates.

The Insurance Bureau of Canada is currently surveying its members on their reaction to Bill 42.

What are the chances this bill will become law?

Given it is a private member’s bill, that’s uncertain.

According to the Ontario Legislative Assembly’s How An Ontario Bill Becomes Law: “Private Members’ Public Bills do not often receive Third Reading and Royal Assent (become law). However, they bring matters that concern private members, their constituencies or their parties to the attention of the House, the Ministries, the media and the public. They may have an impact on government policy or indicate policy directions a future government might take.”

A related effort, Bill 44, the Ending Automobile Insurance Discrimination in the Greater Toronto Area Act,did not go the distance. Itproposed making the GTA one single territory for the purpose of determining motorists’ insurance premiums and was defeated in the legislature Nov. 1 on second reading.

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