Op-ed: Steering clear of higher auto insurance premiums

Provincial regulator offers a little-known but very valuable tool to help Ontario drivers find out who charges the most – and the least – for car insurance, columnist Michael Prentice says
Car

You get what you pay for, right? WRONG! It’s what many marketers want us to believe, but often it’s not true.

Auto insurance is a classic example of this. Some Ottawa motorists are paying almost four times as much as others for identical insurance coverage. And many auto insurers charge twice as much as others for identical coverage.

Don’t take my word for it. This comes from latest data from the Financial Services Commission of Ontario, an agency of the Ontario Ministry of Finance. The commission regulates the insurance industry and closely tracks auto insurance rates in the province.

Ontario has the highest auto insurance premiums in Canada despite having one of the lowest levels of crashes and fatalities, according to a recent study by David Marshall, Ontario’s auto insurance adviser.

The average annual auto insurance premium in Ontario is $1,458, which is more than 50 per cent higher than elsewhere in Canada, according to the Marshall study.

The higher premiums paid by Ontario motorists are blamed chiefly on the “system” – that is, on the cost of legal wrangles over who pays, and how much, when there are injuries or fatalities in motor vehicle accidents.

But consumers are wrong if they believe they are paying high insurance premiums solely because the system is flawed or broken, and lawyers are the big winners in this. It’s equally likely that these consumers are being overcharged by their insurance company.

As with anything else, you have to be careful when comparing auto insurance rates. You must not compare apples with oranges. When insurance companies offer widely varying rates, you must be sure they offer identical coverage.

The Financial Services Commission of Ontario does a masterly job in comparing auto insurance rates. But it does a relatively poor job in communicating this information to the public.

According to its latest data, a married Ottawa couple – both 40-ish, with good driving records and each with a vehicle that is several years old – could pay less than $1,600 a year in auto insurance. Or they could pay more than $5,800 a year for the same coverage.

To take another example, a 35-year-old Ottawa woman with an unblemished driving record and owning a 2012 Nissan Versa could pay as little as $938 a year in auto insurance, or as much as $3,111 – for identical coverage.

When you think about it, it’s not unusual for consumer prices to vary by more than 100 per cent between one retailer and another. That’s what a genuine “50 per cent off sale” means.

I have often noticed that, if you shop around for meat, fruit and groceries, it’s actually possible to cut the week’s food bill in half.

Making purchases online is trendy. Many sellers even offer free shipping. But do they offer savings? I doubt it. And, in any case, it’s very difficult to know. Especially when an Internet marketer offers “70 per cent off” something the same marketer claims cannot be found anywhere else!

Recently, the TV ad that epitomized a mindless consumer featured a woman who boasted she had a poor credit record and could not be bothered to shop around for a car or a car loan. Yet she seemed confident she was getting a good deal.

I always used to be vague on whether I was getting a good deal for car insurance or any kind of insurance. Shopping around is difficult.

But now, it is far less difficult for those who take the time and trouble to consult the Financial Services Commission of Ontario’s website.

Finding what you are looking for – for example, a rate comparison of companies offering car insurance in Ottawa – is challenging. You will probably not find a profile that precisely matches yours. But you will learn a lot about which companies have the highest – and lowest – auto insurance rates in this area.

Go to www5.fsco.gov.on.ca/autorate/airchooseprofile.aspx, and then follow prompts to get rates for the profile closest to yours.

Michael Prentice is OBJ’s columnist on retail and consumer issues. He can be contacted at news@obj.ca.