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Why Is Ontario Car Insurance So Expensive?

March 26, 2021
4 mins
A man and woman looked concerned at paperwork as they sit at a table

The cost of living in Canada can vary significantly from one region to another. Food, gasoline, housing; these expenses and other necessities fluctuate depending on where you live. The same holds true for the cost of car insurance.

Across Canada, insurance rates vary considerably. Ontario is the second-most expensive province for car insurance after British Columbia, prompting many drivers to wonder why Ontario car insurance is so expensive?

Of Canada’s 10 provinces, three feature government-owned and operated car insurance systems: B.C., Saskatchewan, and Manitoba. In Quebec, the government manages auto insurance for bodily injuries; otherwise, private insurers provide property damage insurance. The other six provinces – Newfoundland and Labrador, Nova Scotia, New Brunswick, Prince Edward Island, Ontario and Alberta – have private auto insurance systems, as do Canada’s three territories (Nunavut, Yukon, and the Northwest Territories).

For provinces like Ontario with private insurance systems, multiple for-profit insurers competing with each other spurs innovation and helps to drive down the price of insurance. But the private-is-cheaper argument doesn't always hold up.

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Which province has the most expensive car insurance?

According to the Insurance Bureau of Canada, the average annual auto premium costs for each of the 10 provinces in 2019 were:

  • British Columbia: $1,832
  • Ontario: $1,505
  • Alberta: $1,316
  • Newfoundland and Labrador: $1,168
  • Manitoba: $1,080
  • Saskatchewan: 1,235
  • Nova Scotia: $891
  • New Brunswick: $867
  • Prince Edward Island: $816
  • Quebec: $717

But 2019 feels like a lifetime ago. Now, the average Ontario car insurance premium is $1,616, according to RATESDOTCA’s data from December 2020. Furthermore, drivers in Toronto pay an average of $2,201 for a standard auto policy.

The COVID-19 pandemic, however, has in many ways, upended how often insurance rates rise in Ontario. Throughout 2020 and into 2021, many insurers offered rebates, discounts, and other forms of relief to their customers to help them cope with the pandemic’s financial fallout. Regardless, it is the Financial Services Regulatory Authority (FSRA), Ontario’s car insurance regulator, that decides whether an insurer can increase or decrease their rates. In February 2021, FSRA permitted two insurers to adjust their rates (one a modest increase, the other a decrease), resulting in an overall market increase of 0.03%. The month before, January, saw an overall market decrease of 0.01% after FSRA allowed three insurers to reduce their rates.

Why is auto insurance so high in Ontario?

Many variables determine what your auto premium is. Some of them include:

  • Your driving record and experience
  • Your age, gender, and marital status
  • The type of vehicle you drive and how many kilometres you travel annually
  • Whether or not you use your vehicle to commute to work

What you pay also depends on the type of policy you choose and whether you include optional coverages like collision and comprehensive insurance. Also, if you opt to boost the mandatory coverage limits, such as third-party liability, accident benefits, and uninsured auto protection, that too can raise the cost.

But other factors are influencing the cost of insurance beyond any one driver’s control, including:

  • Fraud. IBC says insurance fraud costs every Ontario driver up to $236 a year. Think about that in the context of the cost of your auto policy. Up to $236 of what you pay for insurance covers the cost of fraudulent insurance claims every year.
  • Extreme weather. The weather across Canada is changing. There are more catastrophic storms taking place more frequently in all parts of the country. Severe weather caused $2.4 billion in insured damages in 2020 (up significantly from $1.3 billion in damages in 2019). Here in Ontario, the two most-costliest weather events in 2020 were a snowstorm in January ($98 million in damages) and a windstorm in November ($88 million in damages).
  • Distracted driving. Motorists who aren’t paying full attention to driving because they’re fiddling with a mobile device, eating, or doing anything other than concentrating on the road are, in part, increasing the cost of our insurance. That’s because distracted driving leads to more car crashes, injuries, and deaths.
  • The cost to repair vehicles. There was a time when if you got into a minor fender-bender, and you needed to get the bumper on your car adjusted, it would cost you a couple hundred bucks. Those days are long gone. The vehicles we drive today are loaded with technology, often in places on the vehicle that are most susceptible to damage. Rear-view cameras, sensors in mirrors, driver-assist technologies, and other digital doohickeys have transformed cars into computers on wheels. Even a vehicle’s headlights may have sensors in them. That means a minor repair or regular maintenance can cost a lot of money nowadays. For example, one Mississauga woman was shocked to learn how much it would cost to replace the headlights on the Mercedes she was leasing: $7,000(!).

Car insurance: compare rates online to get the best price

Regardless of where you live in Ontario, finding the best possible price for the car insurance coverage you need comes down to a few clicks. Take advantage of RATESDOTCA’s free auto quoting tool to compare policies and premiums from a broad range of insurers.

Liam Lahey

Liam Lahey is a versatile marketer with experience as a staff and freelance writer for many business and technology publications and newspapers. He previously worked as the editor and media spokesperson for RATESDOTCA, handling home, auto, and travel insurance topics.

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