With the next provincial election less than 18 months away, Dalton McGuinty’s Liberal government is hoping the proposed package of vehicle insurance changes will bring premium relief to Ontario motorists.

Unlike the last 3 years, premiums are now increasing rapidly.

According to one published report, rate increases for the first quarter of 2010 averaged almost 12% over the same period last year.*

The reason?  The system is under extreme pressure, with the lid threatening to blow off, in part because the Financial Services Commission of Ontario has suppressed needed rate increases over the past several months.  Now accelerated rate increases are needed to ease the pressure

But the government is between the proverbial rock and hard place.  On one hand, motorists are voters, and the rising cost of automobile insurance has been a political issue in Ontario, because of the government’s tight control of the product.

On the other, the fear is that an insurer like State Farm or Allstate – both of which are large writers of automobile insurance in Ontario and have both generated unprofitable results over the last 2 years – could simply withdraw from the province.

The primary issue is not the cost to repair vehicles; it’s the cost of healing injured people that is spiralling upwards.  But the maddening piece is the evidence of growing “leakage” – claims dollars that go into unnecessary multiple assessments and legal squabbles, in many cases delaying the necessary treatment for minor sprains and whiplash-type injuries.

It is true that Ontario has had the most generous menu of benefits for those injured in automobile accidents of any jurisdiction in North America.  But it’s also true that Ontario has undergone more changes to its government-mandated automobile insurance system over the past 20 years than almost any other jurisdiction in the world.

The McGuinty Liberals’ response: another product change requiring policyholders (as of September 1, 2010) to choose what level of injury reimbursement they want on a range of coverages.

Will it bring premiums down?  Not without damaging the supply side.  But with proper advice, it could be a way for Ontario motorists to mitigate rising prices.

*Kanetix quarterly review   http://www.kanetix.ca/about-car-insurance-rates-Q1-2010

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This entry was posted on Friday, April 16th, 2010 at 4:30 pm and is filed under Automobile. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.