Why is auto insurance in Brampton so expensive?

When Jessica moved from Kingston, Ont. to Brampton two years ago, something surprising happened to her insurance rate: it shot up by $50 a month.

“I went from paying $140 a month to $190 a month,” she said. “I’ve been insured for well over 20 years and this was the first time I’ve ever seen it go up like that.”

Jessica is just one of many new residents that have faced the Brampton sticker shock after moving to the quickly growing suburb. Brampton is easily one of the most expensive cities in Canada to get auto insurance — the average premium for postal codes in the city is 75% higher than the average Ontario premium, according to data from LowestRates.ca. 

The city, just west of Toronto, is nestled in a province that itself has the highest average premiums in Canada. At $1,458, the average Ontario insurance rate is 24% higher than Alberta’s private insurance scheme and about double Quebec’s public one.

Insurance “is based on claims,” says Pete Karageorgos, director of consumer and industry relations at Insurance Bureau of Canada, and Brampton is “an area that has a disproportionate number of claims.’

And the more likely you are to use insurance, the more you have to pay.

For every 100 vehicles in Brampton, there are 11.5 claims, compared to the Ontario-wide average of 9.3 claims. The average Brampton claim costs insurance companies $14,800, compared to $11,500 for the rest of Ontario, according to 2015 data provided by the Insurance Bureau of Canada.

Why? There's no single answer, but some factors include higher speed limits and higher incidents of fraud. Police have noted that Peel Region, which includes Brampton, has a high rate of staged collisions. This type of fraud can take multiple forms, including forcing a fender bender or sideswiping a vehicle. Fraudsters will use these collisions to overstate damage or injuries and collect large insurance payouts as a result.

A major problem, however, is Ontario’s incredibly inefficient provincial auto insurance system. Our roads are, contrary perhaps to popular belief, safe.

We have relatively few accidents and the second lowest rate of fatalities in all of North America, next to only the District of Columbia.

In fact, Ontario insurance premiums are so unusually high that it prompted a report by David Marshall, advisor to the Ministry of Finance on auto insurance, earlier this year, Fair Benefits Fairly Delivered: A Review of the Auto Insurance System in Ontario.

Marshall reveals the myriad of problems within the system, starting with the extremely complex and unclear legislation and regulations surrounding insurance that result in lengthy disputes.  A full third of benefit costs, $1.4 billion per year, are not going toward helping and rehabilitating victims, but to lawyers and experts in fighting over claims.

Take disability or workplace health insurance, as an example of insurance that is paid out promptly with few disputes: eligibility and benefits are well-defined, usually in an easy-to-read chart with a maximum amount per year or lifetime.

Car insurance contracts, on the other hand, are a jumble of vague prescriptions. Insurance providers have 50 pages of paperwork, while claimants must fill out eight pages of documents, to start.

There is currently no  “efficient, professional and unbiased way to diagnose the true needs of an injured person and to provide appropriate treatment,” Marshall writes.

Because the system is based on cash, not health care outcomes (how much money you can get for being hurt versus how many chiropractor appointments you need to cure whiplash, for example), all sides are involved in a tug-of-war: companies try to reduce their cash payouts and claimants try to increase it. Along the way, health care providers and lawyers are taking huge scoops out of the pot.

Our cash system also lends itself to a massive fraud industry. It’s such big business here that the government commissioned an "Auto Insurance Anti-Fraud Task Force" in 2011. It reported that 9% to 18% of annual claims costs in 2010 are due to fraud. Fraudsters in Ontario are often professional, well organized and, as mentioned above, are particularly active near Brampton.  

Until Ontario decides to fix the system, and we boot the criminals out, sorry Jessica and other Bramptonians, you’re stuck with the medal for highest premiums in Canada.