To drastically reduce auto insurance rates in Ontario, fairer pricing systems and usage-based insurance (UBI) may be the most effective, according to an industry watcher.
The Ontario government is proposing Measures to reduce the cost of automobile insurance. Among them is discuss the development of a new framework to ensure rate fairness that replace obsolete directivesincluding territorial notation.
“If they could find a better way to rate drivers more appropriately based on their previous experience and the conditions they continue to exhibit, I think that would go a long way,” says Matt Hands, Director of Insurance at Ratehub.ca. “Seeing this scoring system change significantly, we will actually see a positive impact.”
Ontario’s budget proposal “could have a big change in how we see our auto rates calculated,” Hands said. Canadian underwriter. “It could help drivers in what are currently considered high-risk areas pay a cheaper price. And the industry [would] be able to identify high-risk individuals and then assess them accordingly, without penalizing others in the vicinity.
UBI is another way to get lower premiums. But insurers need to be more transparent with their policyholders about how it works before it becomes an effective method of lowering auto rates, Hands says.
“There’s a lot of mistrust in UBI products because consumers just don’t understand how they’re going to be fully impacted by the product or how rate changes are calculated,” he says.
“I think there must be [transparency] around pay-how-you-drive products, and really open up about how those calculations work and how they can actually positively or negatively impact your rates.
Although consumers have more choice when it comes to paid UBI products, more competition among UBI products would also help consumers, Hands adds.
The budget also proposes to increase consumer choice by making the purchase of non-at-fault property damage coverage (also known as direct compensation property damage, or DCPD) optional.
This would have the greatest saving effect for those with older cars that are worth less than the cost to insure them.
However, Hands cautions that a fully open system may not be in the best interests of many consumers and does not recommend new-car drivers forego DCPD.
“I don’t think offering a completely open system is probably the best thing, although it would probably be the way we can save the most,” he says.
While this may allow consumers to customize their policies to suit their needs, “the average driver won’t know enough about insurance to feel fully confident in customizing a comprehensive policy,” says Hands.
People who want to customize their policies can see significant rate cuts, but “it’s too early to tell” by how much, Hands says. While this method of personalization may prove useful for some, Hands says rethinking risk pooling is the best method.
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