Ontario plans to reduce car insurance rates by 15 per cent in the next two years, Finance Minister Charles Sousa announced on Friday.
Reducing auto insurance rates by 15 per cent was a condition set by the NDP when it agreed to support the Ontario budget earlier this year, however the NDP called for the reduction to happen in the first year.
NDP transportation critic Gilles Bisson told the CBC that auto insurance companies have profited by billions from legislation that reduced payouts for personal injuries. He says those savings were never passed on to the consumer.
“That’s why in the budget we said we need 15 per cent. We need it now — it has to be done this year,” he said ahead of the announcement.
Drivers have complained that Ontario car insurance costs are too high, with rates rising rapidly over the past few years even for drivers with 25 years accident free.
Randy Carroll of the Insurance Brokers Association of Ontario welcomes a rate reduction, but says the government must first crack down on insurance fraud, which he said is costing the industry $1.5 billion annually.
“If we get the rates down before the fraud is out of the system it will just put undue pressure on insurers and will end up putting undue pressure on consumers,” he told CBC News.
Auto insurance rates are determined by individual insurers using a combination of factors including driving experience, driving record, use and location of the vehicle, the type of vehicle driven, and amount of coverage and deductibles selected.
But Ontario’s Superintendent of Financial Services reviews rates proposed by every company and the Financial Services Commission of Ontario regulates auto insurance to ensure protection for drivers. The FSCO will likely enforce Ontario’s mandated rate reductions, with rates dropping eight per cent in the first year and an additional seven per cent in the second. Ontario drivers won’t see the new rates kick in until they renew their policies.
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Excerpted from CBC.ca
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