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Ontario’s proposed budget – what it could mean for your auto insurance

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With the 2022 election coming up, voters have a lot to consider. One of the issues that may be concerning you is the rate of auto insurance in Ontario. In their proposed budget, the Progressive Conservative party presents measures intended to reduce the cost of car insurance – let’s examine what some of these proposals are and how they could impact you as a driver.

How will the proposed budget impact Ontario drivers?

The goal of the Progressive Conservative’s proposed changes is multifaceted – while reducing the cost of Ontario auto insurance is the main objective, the government’s proposed measures include creating more choice, cracking down on fraud, and enhancing fairness. 

In the 2022 Ontario budget, the government cited the progress made within their multi-year strategy in the Putting Drivers First Blueprint from 2019. However, they also acknowledged that more work needs to be done. A few tenets in their plan include:

  • To increase competition in the auto insurance market
  • To increase innovation by enabling more usage-based insurance programs
  • To increase convenience by allowing electronic communication
  • To ensures fairness in auto insurance rates by developing a new framework
  • To decrease fraud in the industry by implementing anti-fraud processes

Increasing competition

By allowing insurers to offer special discounts, incentives and rebate programs, customers will be able to shop around for the best rate and value-added bonuses on auto insurance they can find. 

Similarly, customization of insurance products will further enable consumers to find a car insurance policy that meets their specific needs. One of the measures proposed in the budget is to make purchasing not-at-fault property damage (also known as direct compensation for property damage or DCPD) optional.

Should DCPD insurance become an optional add-on, this would be of benefit to drivers of older vehicles that can cost more to insure than the value of the car. While no-fault insurance makes handling an insurance claim faster, as individuals will only deal with their insurance company and not the other party’s insurer, the reduced cost of insurance could be an attractive incentive.

Increasing innovation

Usage-based insurance (UBI) programs calculate insurance rates on the actual use of a vehicle. These programs are ideal for individuals who either drive safely or only travel short distances. No longer will drivers need to pay for conventional rates based on estimated driving behaviour.

Presently, CAA is the only carrier in Ontario offering pay-as-you-go insurance. By making it easier for companies to get involved in such programs, a more competitive market will be created.

Along with DCPD insurance becoming optional, the increased innovation will provide consumers with more solutions for their car insurance needs. You won’t be bound to purchase policies with coverage options you don’t need but can instead reduce your premiums by taking advantage of more a-la-carte options.

Increasing convenience

Another commitment cited in the Ontario budget is to increase convenience through the implementation of electric communication in the auto insurance industry. This includes permitting electronic communication and offering electronic proof of auto insurance for consumers which can allow you to more easily access the information you require when and where you need it. Simply call up the proof of insurance on your cell phone, and you’ll have everything you need at your fingertips.

Ensuring fairness

One of the ways in which the Progressive Conservative party aims to increase fairness in the car insurance business is by eliminating territorial benefits. This means that, in effect, areas with fewer accidents could get similar car insurance quotes as those in which there is a higher volume.

Ontario drivers are also required to use their workplace insurance benefits before making an accident benefits claim with their auto insurer. To ensure this system works well and stays modern, the Progressive Conservatives propose that the government will review how drivers access their benefits when they also have an extended healthcare plan involved. 

Decreasing fraud

In terms of cracking down on fraud, the Conservatives are proposing amendments to the Insurance Act, and if passed, insurance companies will be required to provide information on fraudulent activity to the FSRA (Financial Services Regulatory Authority of Ontario). In this case,  carriers will be accountable for managing, tracking, and reporting insurance fraud while the FSRA will also be consulting on a fraud reporting service tool and fraud management plans. 

Fewer cases of fraud mean insurance companies can save on the associated costs – in turn, this could lead to lower auto insurance premiums for consumers as providers have less money to make back. 

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The impact on the auto insurance market

By modifying the rules and regulations of the auto insurance industry – such as allowing for more customizable plans, rewards, and incentives – a more competitive marketplace could potentially come to life.

As a consumer, this could mean that there would be greater options available to you when looking for the best price on auto insurance. And you might be able to find a coverage plan that is more ideal for your lifestyle.

While the information within the proposed budget is scarce regarding the impact that the proposed changes would have on the marketplace, it will be interesting to see how insurance providers respond should it come into effect.

The impact on your car insurance rates

The Progressive Conservative’s proposed changes to auto insurance could potentially have an impact on your auto insurance rate. Consider the elimination of territorial benefits. In doing so, areas with fewer claims and accidents may see an increase in their insurance premiums while areas with more claims may see a decrease.

The thinking behind this is that areas in which there are fewer accidents will subsidize the insurance rates in higher-risk areas, therefore creating a level field of auto insurance premiums. Despite this, such an action could lead to an increase in insurance rates for all drivers as attempts are made to spread the risk.

With more usage-based insurance plans, individuals who drive less frequently and over a shorter distance will benefit from a cheaper rate than someone who does a lot of driving. Similarly, with more customizable insurance options, people will be able to better tailor their auto insurance to their needs, potentially reducing their rates.

The bottom line

The proposed changes in the Progressive Conservative’s budget could create a more competitive, potentially more consumer-friendly auto insurance market. The budget itself is vague on details, however, so how these changes would be implemented is questionable and the long-term effects remain to be seen.

Also read

How much is car insurance in Toronto?

Driving less due to gas prices? Ask for a car insurance discount

Inflation in Canada – what it means for your auto insurance