Why are insurance rates for drivers higher in Brampton than anywhere else in the province or for that matter across Canada? If you ask insurance companies, they will point to rampant fraud, more accidents and claims as well as the higher cost per claim in Brampton. Is it true? It depends who you ask. Off the record there is enough evidence pointing to high levels of fraud but on the other hand insurance companies are slow to provide evidence that fraud costs their industry over a billion dollars annually.
Insurance companies are in the spotlight ever since the University Schulich School of Business study revealed Ontario drivers may have overpaid by as much as $4 billion for auto insurance from 2001 to 2013 – $840 million in 2013 alone.
The report examined that the current rate setting formula is based upon the idea that insurance companies should be making a Return of Equity (ROE) of 12 per cent profit after tax.
This rate was set 20 years ago and hasn’t been changed.
In an interview with Can-India, Steve Rastin, President of the Ontario Trial Lawyers Association (OTLA) said that if claim costs and fraud are being used to justify high insurance rates, then insurance companies should use their resources to fight fraud rather than pass on the cost to consumers.
“”We would like to help, it’s in our common interest. Every dollar lost to fraud is not paid to victims of auto accidents. If fraud costs are a billion dollars a year, then it ought to be a priority to get rid of it,” he said.
“We are very afraid that the government will continue to tighten caps on payouts, income replacement etc. For income replacement, the cap is $400 per week, adjusted for inflation, it has actually fallen 35%. How can someone in Brampton survive and pay his or her mortgage?
Rastin believes that insurance companies ought be more transparent with their data. Ontario’s drivers should envy drivers in British Columbia where auto insurance is provided by the government and insurance premiums are calculated depending on the person’s driving record and not where they live. Here in Ontario, a driver with an excellent record living in Barrie who moves to Brampton to be closer to his place of work could potentially see his auto insurance rates jump 40 %. He will be paying for the alleged sins of his neighbors.
From the looks of things it doesn’t seem as though prices are going to go south anytime soon. Unless insurance companies show they are serious about auto insurance fraud, it will continue leading some to believe that it is simply an excuse to gouge hapless drivers.