Millions of Ontario drivers may soon face double-digit premium hikes due to cost pressures impacting insurers and prompting premium increases.
Recently there have been reports that insurers serving more than a quarter of the province’s drivers are being allowed to raise rates a second or third time in about 12 months. This will translate into increases averaging between 11% and 19%.
“The cost to deliver the product has gone up, just like the cost of anything, if it’s more expensive to build the product the cost to the consumer is higher,” a spokesperson from the Insurance Bureau of Canada (IBC) told Canadian Press newswire on the evening of Tuesday Oct. 20.
Finance Minister Dwight Duncan is expected to announce changes to auto insurance policies as part of the government’s five-year review. His announcement comes more than six months after the Financial Services Commission of Ontario (FSCO) submitted a report that included 39 recommendations to help fix Ontario’s ailing auto insurance product.
In the wake of potential rate increases, that will affect millions in Canada’s most populated province, politicians are coming out in defence of the product and the rate increase.
Last night, Premier Dalton McGuinty said insurance is lower now than it was when he was first elected six years ago.
“To compare that to what happened to the cost of living I think that’s a pretty good place to be as a driver in the province of Ontario,” said McGuinty.
McGuinty said cost pressures have been mounting for insurers, some of whom have increased their premiums.
NDP critic France Gelinas said it is a wrong time for a double-digit increase in auto insurance when many families are still struggling through the recession.
A new public opinion poll, released yesterday, shows that Ontario motorists are just as concerned with coverage and benefits as they are with cost.
The survey, conducted and released by Harris/Decima, found that that 88% consider adequate benefits to be somewhat or very important, compared to 91% who believe the cost of insurance is somewhat or very important. Statistically, there is little difference.
“The provincial government claims that the most important issue for Ontarians is the cost of insurance. But according to our survey, this is clearly not the case,” says Nick Gurevich of the Alliance of Community Medical and Rehabilitation Providers (ACMRP). “Protection is just as important to people as affordability.”
Asked what the province’s primary responsibility is with respect to auto insurance, 58% of respondents said it is ensuring an adequate level of protection for drivers, while only 32% said it is ensuring premiums are affordable.
Finance Minister Dwight Duncan is currently considering a proposal—from FSCO and backed by the insurance industry—which would slash mandatory medical and rehabilitation benefits from $100,000 to $25,000.
The survey suggests that the government will face negative public reaction if it adopts this recommendation. Those who think the introduction of a stripped-down version of auto insurance is a ‘bad idea’ outnumber those who think it is a ‘good idea’ by almost a 2-to-1 margin.
Minister Duncan was supposed to usher in changes to auto insurance last June.
Originally published in Canadian Insurance Business Magazine in October 2009