Understand how auto insurance rates are set. Insurance Shopping.

If you’re shopping around for auto insurance it’s important to know how insurance companies set their rates.
Many factors are at play, so here are some useful tips from the Financial Services Commission of Ontario (FSCO), the regulator of the auto insurance industry in Ontario, to keep your rates as low as possible.

The auto insurance rate you are charged will depend upon:

  • The type of vehicle you drive.
    Auto insurance companies evaluate vehicles based on their makes and models, according to their claims experience. Vehicles with lower costs for repairs, lower rates of injury, and lower incidences of accident and theft, will receive lower rates.
  • Your driving record, which includes your years of driving experience, past at-fault accidents, completed training courses, and convictions such as speeding or impaired driving.
  • Driving routine and frequency.
    The more time you spend on the road, the higher the chances of becoming involved in an auto accident.
  • Where you live.
    If you live in a busy urban area, there is greater risk for accidents and theft, thus higher rates are charged.
  • Your age.
    Costs are generally lower for drivers 25 years of age and older.
  • The amount of coverage you purchase.
    Your insurance rates will be higher if you purchase additional protection beyond what is mandatory, such as the optional collision coverage, which protects you for damage to your vehicle, regardless of who caused the accident.
  • The deductible, which is the portion of a loss that you are required to pay.
    Your deductible can vary depending on the type of coverage you purchase and the percentage of fault you are assigned in the event of an auto accident. There are deductibles for direct compensation-property damage, collision or upset, comprehensive, all perils, and specified perils coverage. If you opt for a higher deductible, your rates will likely be lower.
  • The insurance company you choose.
    It’s important to shop around because financial factors unique to each insurance company will influence your rates. Insurance works according to a “pooling” concept. Your rates are based on the claims experience of the entire group. Some insurance companies have claims that are much higher than others. This results in some insurance companies setting higher rates than others for the same type of insurance coverage.

Factors that cannot affect insurance rates

Under Ontario law, insurance companies cannot use certain criteria to set your auto insurance rates, such as: credit history or rating, past bankruptcy, income and employment status, debts, whether you rent or own a home and not-at-fault accidents.

More information on auto insurance is available online at www.fsco.gov.on.ca where you can download the brochure Understanding Automobile Insurance.
-- News Canada