Auto insurance in Ontario is complex. You don’t need to look far in Canada’s most populous province to find a confused motorist who is unsure why their premium is so high. High premiums have become the norm in Ontario, where there are constant calls for insurance reform. However, in 2020 when the world was reeling from the coronavirus pandemic, something interesting happened: auto insurance rates fell.
While many industries buckled and people struggled financially under the weight of the health crisis and following stay-at-home measures, auto insurance in Ontario received a respite. Suddenly there were fewer vehicles on the roads, fewer collisions, and less risk. Insurance companies could save money and pass on savings to customers in the form of lower premiums.
Coupled with measures to help consumers through the financial uncertainty of the crisis, insurance rates in Ontario fell throughout 2020. Still, there has been a lot of debate about what the future holds for car insurance in the province. Will rates continue to decline as we look further into 2021 and hopefully a post-COVID-19 world?
A COVID-19 Rate Drop
As vaccination programs begin to work and the world emerges cautiously from pandemic lockdowns and restrictions, a return to normalcy is likely to mean insurance rates in Ontario will return to normal too. In other words, drivers can expect to see rates increase again rather than continue to decrease.
Looking ahead, when the dangers of the virus subside, the same problems that impacted the insurance market in Ontario will remain. Government measures introduced to combat coronavirus were a direct reason for falling insurance rates during 2020.
A recent report by Mitchell International finds that the lockdown measures meant fewer vehicles were on Canada’s roads, resulting in a significant drop in collisions during 2020. According to the report “A Look Back at 2020 Trends in Auto Insurance”, fewer claims were made as a result. During April 2020, collision frequency across Canada dropped 50.9% compared to the same period in 2019.
While April proved to be the peak month in terms of reduced accident frequency, decreases continued during the year. In May, there were 30 per cent fewer crashes year-on-year, while in November, collisions were down 30 per cent. Since then, accident rates have been slowly creeping back up as more vehicles return to the roads.
In Ontario, the province with the most drivers and vehicles, similar changes were observed. The Ontario Provincial Police (OPP) says collisions fell 26 per cent during 2020.
Rate Relief Programs
COVID-19 restrictions did something years of debate and reform were unable to: reduce the cost of auto insurance in Ontario in a significant way. Business lockdowns, stay-at-home measures, and travel restrictions positively influenced insurance rates despite Ontario’s insurance problems persisting, and in some cases increasing. Insurance fraud, distracted driving, impaired driving, rising claims and repair costs all remain problems in the province
Insurance companies also brought further help to customers during the crisis. Many carriers introduced discounts and rebates during 2020 and into early 2021 to bring rate relief to drivers. These measures, alongside reduced collisions, helped to lower rates for many motorists in Ontario.
Predictions for 2021
The question drivers in Ontario may be asking is whether 2020 is the new auto insurance norm or will the car insurance market return to 2019 rate highs? Unfortunately, the answer is rates are likely to increase again.
2019 was yet another year of a high claims ratio from the cost of repairs, insurance fraud, and increased collisions in Ontario. During the year, the average cost of auto insurance in the province increased to $1,634, according to InsuranceHotline. Rate increases were already approved for the first months of 2020, meaning last year was on course to be another of rising auto insurance costs.
That never happened, only because COVID-19 intervened. What happens as we move deeper into 2021 now depends on the situation with the pandemic. As Canada’s vaccination program gathers pace, restrictions and lockdown measures are likely to ease.
As reported by RATESDOTCA, Intact Financial Corp. CEO Charles Brindamour says there are still 10% fewer drivers on the roads compared to before the pandemic. As traffic volumes return to normal, Brindamour suggests rates will increase in the coming months. “Our view is that when driving returns to normal, we will see correction [in premiums] take place again,” he said.
Making rate predictions in Ontario is tough, especially while the pandemic continues to impact the insurance industry. Whether rates increase or remain the same during 2021, ensuring you have the best auto insurance for the most affordable price is important. That’s why comparing quotes is a straightforward way to find the coverage you need at the lowest rate possible.
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