You can’t drive without it.

You can’t always afford it.

And now a new study shows you why.

Research by the Fraser Institute indicates Ontario drivers pay one of the highest amounts for auto insurance in the country. The average motorist in this province shells out almost $1,350 a year for their protection policy.

Only B.C. is higher. Motorists there pay just over $1,400 annually.

Prince Edward Islanders come off the best. They only fork out an average of $825 a year for coverage.
 
The study is actually supposed to show the failure of government run insurance programs, which exist in  British Columbia, Saskatchewan, Manitoba and Quebec.

The numbers indicate drivers pay more in provinces where the government has tight control over rates, and they were the only places where prices actually increased between 2004-2005. 

The Institute used a variety of calculating measures to arrive at its conclusions, since rates are set on different criteria in each place. It finds that government run programs often force motorists to pay for coverage they really don’t want or need and suggests a deregulated system would alleviate the problem.

Which brings us back to Ontario, which has a free market system. Why are we paying so much?

Population is one explanation. More people mean more drivers, more accidents and more cars that can be stolen, all of which can cause rates to soar.

Your driving record – including tickets and previous accidents – is another factor. So is your age, the age of your car and how much time you spend behind the wheel.

And the insurance companies have long blamed escalating fraud for upping the antes.

Some also suggest our no-fault system can drive up premiums.

And while many motorists are convinced it’s simple greed at work, insurance companies here insist their costs have skyrocketed in recent years, which gets reflected in the rates.  

The Liberals moved to reduce soaring insurance costs back in 2004, announcing the average driver would get a 10 percent reduction. Yet we still shell out one of the highest amounts.

“One of the key drivers in auto insurance cost is how the product is defined by government,” explains study author Brett Skinner.

“Premiums simply cover the cost of providing auto insurance. If government regulations require generous and expensive auto insurance benefits, that gets reflected in higher premium prices, whether or not the provider is government or the private sector.”

In this province, the regulations are set by the Financial Services Commission of Ontario (FSCO).

“The government and the regulators are defining what the product is and what the price is,” explains Doug McClelland of the Insurance Corporation of B.C., which has a monopoly on basic auto coverage in the province.

“It’s not the private sector that sets the insurance rates in any province, it’s the regulator that does.”

Here’s a look at the Institute’s list of average car insurance rates by province.

2005 average earned premium by province

British Columbia: $1,404

Ontario: $1,347

Saskatchewan: $1,197

Manitoba: $1,152

New Brunswick: $1,044

Alberta: $1,036

Quebec: $988

Newfoundland: $947

Nova Scotia: $871

Prince Edward Island; $825

To read the entire study, click here (.pdf file)

How to keep your rates down
(Courtesy FSCO)

Discounts

Driver Training Discount: Most companies offer a discount or a reduced premium for new drivers who have completed a recognized driver-training program.

Group Discount or Group Rates: If you belong to an eligible group, check to see if it offers group rates. An eligible group may include employees of the same employer, members of a union or professional or occupational association, or certain non-profit associations.

Multi-Policy Discount: Some insurance companies offer a discount if you purchase your vehicle and home insurance from the same company. This discount can range from 3 to 15 percent.

Multi-Vehicle Discount: You may be able to get a discount if you insure more than one vehicle with the same insurance company. The multi-vehicle discount can range from 5 to 15 percent.

Renewal Discount: Your company may offer you a renewal discount if you have been with the company for a certain number of years without an at-fault accident. The discount can range from 5 to 20 percent.

Retiree Discount: If you’re retired and meet certain conditions, you may be able to get a retiree discount on your premium. The retiree discount can range from 5 to 15 percent off your premium for Accident Benefits coverage.

Other Discounts: Some companies may offer discounts if your yearly vehicle mileage is low or if you have an alarm in your vehicle.

Money Saving Tips

-Build a good driving history free of accidents and convictions.

-Be a comparison shopper. Talk to your friends and neighbours. Make some phone calls and check websites for on-line quotes. Compare rates.

-Don’t pay for coverage you don’t need.

-Consider higher deductibles. This means you’ll contribute more toward the loss if you have an accident, but it will also mean a lower premium.

-Pay your premium on time.

-Consider the type of vehicle you drive. For example, if you buy a vehicle with a high theft rate, your premium will be higher.

-Make sure you tell your broker, agent, or insurance company about any changes to your policy (e.g., different drivers, different use of the vehicle). In some cases, your premium will drop.

-Don’t switch insurance companies mid way through the policy. Wait until renewal time to avoid penalties for cancellation.

Ontario Auto Insurance Consumers’ Bill of Rights

How rates are set

Ontario Insurance Rate Tutorial

Auto Insurance Scam Warnings