How are Auto Insurance Premiums Calculated in Ontario?

car insurance in ontario

Each insurance company has its own particular formula for calculating what it charges for any given policy. Its procedures are presented to and approved by a government agency before being offered to consumers. After approval, these rules become the guidelines for that company’s policies, and they cannot vary their methods without first having changes approved.

Most insurers use the same factors to calculate risk, and therefore cost, even if they weigh each factor differently than their competitors. From a driver’s standpoint, the single most important factor over which they have control are their own driving habits. Those who follow safe driving practices and avoid traffic tickets and at fault accidents achieve the lowest rates. Age and gender also play a role. Generally, young drivers are more at risk and pay higher auto insurance rates as they establish driving and insurance histories. Young men are statistically a higher risk than young women, so there is a rate difference there.

The driver’s home location is another influencing factor. A neighbourhood’s accident and claims history factors into its residents’ car insurance rates. For example, Car insurance Brampton is the most expensive in the province. Drivers living there can pay about $1,000 more than they would in other parts of the province, simply due to the location.

Finally, the vehicle itself and how it’s driven affect cost. A driver who uses a car to drive to work daily pays more than one who works from home or uses public transit. The distance driven, both daily and annually, also influence policy price. A car that drives more miles is at greater risk of incident than one driven occasionally over short distances. A four door sedan or SUV, typical family vehicles, are cheaper to insure than coupe or off-road versions of the same vehicles.

On top of that, options and discounts factor into insurance premiums. These vary greatly by both drivers’ needs and insurer availability.

Is There a Fee for Getting an Insurance Quote?

No, there’s not. Despite heavy regulation by the Ontario government, the auto industry is based on a private company competitive model. Every motorist in Ontario may benefit from aggressive comparison shopping since each insurance company uses its own models to calculate insurance premiums. There can be hundreds of dollars in difference between the quotes from two companies.

Some insurance companies specialize in policies targeted to particular segments of car insurance consumers. For example, one company may provide safe driving and age-based discounts to attract mature and senior clients, while another may give aggressive discounts for successful driver training completion and high school honours students to attract new business. Each company would likely have higher rates for other demographics to offset the promotions given to target markets.

Car insurance companies are free, within the terms of the Ontario Insurance Act, to set its own underwriting rules and policy rates. These must first be approved by the Financial Services Commission of Ontario before being offered on the market. Provided that the company plans fall within the Insurance Act rules, a company may work differently than every other insurer in the province.

Free quotes are a way for a company to share what it believes is its unique advantage with existing and new customers.