Since the pandemic started, collisions have gone down over 56%… but premiums have gone up by $30 per policy!
COVID-19 Profits
Ontario auto insurance companies stand to profit very well as a result of the COVID-19 pandemic. Drivers are using their vehicles less frequently, filing fewer auto insurance claims, and reducing the amount insurers have to pay out in coverage.
The profit for insurers will come not only from fewer claims, but also from the reduced ability of those who have suffered injuries or disability in past crashes to access their treatments. Insurers will be saving money on new claims and saving money on paying benefits on open claims.
In Ontario, such an increase in profit will come in a province where drivers already pay an average of $1,505 per year in auto insurance premiums, the second-highest rate in Canada behind British Columbia. According to York University Professor Fred Lazar, that average auto premium has resulted in Ontario drivers overpaying for auto coverage by $7.6-$12.7 billion between 2011 and 2018.
Considering many people have drastically decreased their driving, auto insurers should be offering better discounts, especially when you consider the high profits insurers are continuing to generate. The reduced risk that comes with many drivers no longer commuting or using their vehicles, should be reflected in reduced auto insurance premiums. Ontario drivers should be compensated fairly while in isolation.
There is a significant disparity in how the pandemic has impacted insurance companies and the people of Ontario. The chart below shows how drivers in Ontario have been driving less and fewer motor vehicle collisions have occurred:
| Class of Collision | 2018* March 17 to July 31 | 2019* March 17 to July 31 | 2020* March 17 to July 31 |
|---|---|---|---|
| Fatal | 190 | 180 | 141 |
| Personal Injury | 13,273 | 11,892 | 6,097 |
| Property Damage | 60,126 | 61,174 | 27,694 |
| Total | 73,589 | 73,246 | 33,932 |
*preliminary data from 2018 through 2020 Source: Ministry of Transportation
Despite this reality most insurers have recently applied for and received rate increases and will see their premiums increase when they renew their policies. According to the Financial Services Regulatory Authority of Ontario (FSRA), the average premium to the end of June 2020 has increased $30 since December 2019 – over the Pandemic months. If each of the approximate 6.6 million drivers in Ontario experienced a $30 increase in premiums, this would result in an increase of revenue for insurers of $198,000,000.
Even before the pandemic, there were questions about how much profit Ontario insurers make off auto coverage each year. In his recent report, Professor Lazar noted a lack of transparency in the data reported to the government by auto insurance companies operating in Ontario. Professor Lazar’s conclusions suggest that profits from Ontario drivers have been propping up casualty lines throughout the country.
While the Provincial government has loosened regulations regarding reducing premiums, and auto insurance companies are taking steps to reduce premiums, there is no way to determine conclusively whether the benefit reductions being offered are in line with the insurers’ profit margins.
Fair compensation and transparency in reporting is needed for there to be meaningful consumer protection for Ontario drivers when it comes to auto insurance.
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