Auto insurance changes coming in Ontario budget: sources

Ontario Premier Doug Ford's government will make auto insurance changes a central feature of the budget it tables on Tuesday, CBC News has learned.

Multiple industry sources with knowledge of the government's plans say the budget will include reforms that give Ontario drivers a wider variety of options to lower their car insurance premiums.

A spokesperson for Finance Minister Peter Bethlenfalvy neither confirmed nor denied the plans.

"The government is always looking at ways to increase consumer choice, cut down on red tape, and make auto insurance work best for consumers," the spokesperson said in an email.  Bethlenfalvy is due to table the budget Tuesday afternoon.

This will be the Ford government's second major attempt at auto insurance reforms. Its 2019 budget included a program called "Putting Drivers First" that then-minister of finance Vic Fedeli said would be transformative.

It's far from clear whether those reforms succeeded in keeping rates down. According to Ontario's auditor general, the average auto insurance premium increased nearly 14 per cent from 2017 to 2021.

Ontario Finance Minister Peter Bethlenfalvy, left, will present the provincial budget on Tuesday. It will be his fourth budget since Premier Doug Ford appointed him to the post in 2021. (Alex Lupul/CBC)

The auditor reported in 2022 that Ontarians were paying the highest average car insurance premiums in the country. Since then, rates across Canada have increased further due to a combination of inflation, rising auto theft, and pandemic-driven supply chain issues. Forecasts predict further premium hikes in 2024.

During the 2022 election campaign, Ford's PCs promised "changes that over time would provide consumers with more options when purchasing automobile insurance."

More leeway to pick and choose coverage

The proposals to come in Tuesday's budget will be broadly aligned with that campaign pledge, industry sources said. CBC News is not naming the sources because they did not have the government's permission to speak about the measures.

The sources say the budget will not include any specific target for reducing average auto insurance premiums across the board. Instead, the measures will increase what the industry calls "optionality" for customers, allowing drivers more leeway to pick and choose their coverage plan, one source said.

Car insurance premiums have risen markedly since dipping slightly because fewer drivers were on the road during COVID-19 stay-at-home restrictions, says John Shmuel, managing editor of rates.ca, a website offering price comparisons on auto insurance and other financial products.

"Inflation started running rampant throughout the whole auto insurance system. Insurers started to see the price for repairs really start to go up," Shmuel said in an interview.

John Shmuel is managing editor of rates.ca, a comparison website for financial products such as home insurance, auto insurance and mortgage rates. (CBC)

He said offering drivers a wider range of options to reduce their premiums is great in theory, so long as they are given adequate information about the potential repercussions of less coverage.

"Ontario's insurance prices can absolutely be lower on average," Shmuel said.

"We can make the market more competitive, we can invite more competition so that more insurance companies are participating here, so that customers have more options."

Auto insurance rates have often become a hot political issue in Ontario over the years. Official statistics from the provincial regulator cited by the auditor general show premiums have risen higher than inflation since 2022.

The previous Liberal government of Kathleen Wynne promised in 2013 to reduce auto insurance rates by 15 per cent within two years, but failed to hit that target.

The Ford government's 2019 reforms increased optionality by allowing insurance companies to offer drivers new types of discounts. Those options included lower premiums for drivers who agree to claim benefits only through an insurance company's "preferred providers" of auto repair or health care services.

Effective Jan. 1, 2024, Ontario began allowing drivers to opt out of previously mandatory coverage called "direct compensation — property damage," which reimburses drivers for damage to their own vehicle in an accident that is not their fault.

Car insurance premiums in Ontario decreased after fewer drivers were commuting during COVID-19 stay-at-home restrictions, but have since risen above pre-pandemic levels. (@OPP_HSD/Twitter)

Auto theft plays role in premiums

Recent national and regional summits have drawn attention to the role that rising auto theft plays in driving up car insurance rates.

The Insurance Bureau of Canada, which represents insurance companies, says car theft claims across the country hit $1.2 billion in 2022, triple the amount of 2018.

Last November, Ford's government allotted $18 million over the next three years to fund police projects intended to combat auto theft, while police forces have come together to launch a task force on carjacking.

Another key factor in car insurance rates in Ontario is the registered owner's home address. There are significant differences in premiums for drivers with identical cars and identical driving history but who live in different places, what some have dubbed "postal code discrimination."

The Ontario auditor general's 2022 report found annual premiums ranging from $1,200 in London to $3,350 in Brampton for otherwise identical insurance coverage.

None of the industry sources could say whether the changes in Tuesday's budget will have any impact on the geographical differences in insurance rates.