By: Surjit Singh Flora
Why is the auto insurance in Ontario so expensive?
According to a former Brampton MPP, the answer has to with the province, not insurance companies.
Former Brampton West MPP Vic Dhillon disclosed the surprising truth earlier this month during a wide-ranging interview regarding insurance coverage, benefits and more.
Even a small per cent reduction would create a massive tax hole in the provincial finances, said Dhillon, who stated that false claims are “just a small tip of the iceberg.”
Moreover, insurance companies are able to claim, and do claim, tax deductions for fraud claims. Dhillon says that the real part of the problem is the provincial government itself.
Dhillon is not the only one drawing attention to the matter of soaring premiums. NDP Auto Insurance Critic Tom Rakocevic made repeated requests earlier this summer for the province to stop premium gouging on Ontario residents.
“It does not matter which political party forms the government; insurance premium increases remain imminent as the government desperately needs more and more tax revenue,” Dhillon explained.
Ontario has some of the highest auto insurance rates in the country, though this has been tempered in recent months by the uncertainty surrounding the COVID-19 pandemic, which has caused lower driving rates and relief measures for customers.
“Instead of getting a discount on auto insurance that reflected the decrease in driving and accidents, Ontario drivers got tossed a few bucks or told to downgrade their coverage, and be grateful,” Rakocevic said in July.
Dhillon added that MPPs, especially those newly elected, do not know the real reason behind the spiking insurance premiums. Without the proper knowledge, and due to hierarchy pressure, MPPs are unable to resolve it.
Dhillon also said that this is not an issue to be resolved by pointing fingers at the insurance companies because “the real problem is inside the government.”
A fact is that without prior approval of the Financial Services Commission of Ontario (FSCO), insurance companies cannot increase the premiums. More insurance premium means more tax revenue for the government. How much difference does it make?
Insurance premium increase (every year) in Ontario is like an indirect tax increase, said Dhillon. Without the approval of the government, the premium cannot be increased. He also added that federal NDP leader Jagmeet Singh failed to help resolve this politicized issue because he did not know what and where the problem was, and the same story is with so many MPPs today.
When asked why he never disclosed this information while he was MPP and member of the Kathleen Wynne government, Dhillon explained that he did not want to lose his job because “(I) had a family to take care of.”
We also reached out to Brampton East NDP MPP Gurratan Singh and Brampton South PC MPP Prabmeet Sarkaria to ask the same question (“Why does the Ontario government not act practically to reduce auto insurance premiums, and permit insurance companies to increase the premium every year?), but did not receive an answer .
In a response from Premier Doug Ford’s office regarding the same question, a response stated that his government “wants to help provide support to Ontarians during this difficult time due to the COVID-19 global pandemic. Our message to auto insurance companies has been clear – they should provide relief that reflects the serious hardship people are facing as a result of this unprecedented situation.
Insurance companies told us a regulation prohibiting rebates was a barrier to providing that relief. That’s why our government was the first in Canada to amend a regulation under the Insurance Act that will enable insurance companies to provide temporary rebates to drivers during this public health crisis. We’ve heard from people across Ontario that they are driving less to help stop the spread of COVID-19. As a result, there are less vehicles on the road and fewer traffic accidents. The change we made allows insurers to provide rebates that reflect the reduced risk environment.
Our government has acted. We’ll be watching to make sure insurance companies step up. Our government will continue to work with regulators to identify new opportunities and monitor how the auto insurance sector is responding to the challenges people are facing.”
Brampton West PC MPP Amarjot Sandhu also responded to the question earlier this week, stating that, “Our government has been keeping a close watch to make sure insurance companies are treating the people of Ontario fairly during this unprecedented time. Our message to insurance companies has been clear from the beginning: you should provide relief that reflects the financial hardships your customers are facing because of COVID-19.”
Sandhu went on to say that all of the 14 largest auto insurance companies in Ontario – who control 97 per cent of the market – have provided relief for Ontario drivers, and auto insurers have offered a combined $1 billion in relief to customers.
Currently, Ontario enjoys the “distinction” of having the city with the highest rate of insurance fraud in the country — Brampton, which has insurance rates that are 70 per cent higher than the provincial average.