Auto insurance rates are approved by the Financial Services Commission of Ontario (FSCO) which has in place a defined application process. Insurance companies need to submit the financials to the government regulator who approves or denies rate increases.
Rates can only be changed quarterly and you can see the changes dating back to 1999 here.
Insurance companies are capped at a maximum amount of profit and they cannot increase rates willy-nilly whenever they want. For an insurance company to receive approval for a rate increase it must be able to show that it has actually had losses in one of the categories—home, auto, etc.
FSCO states that when considering setting rates it will review with its actuaries all the insurance companies’ details in its proposal and data to make sure as per the law, that it is:
Now, when an insurance company has a total rate increase of 1% on its entire book of business, that could mean a lot of different things for all of its customers. Some customers in that book of business will see an 8% increase while others see a 7% decrease. Often the changes are applied per territory but could include one of the hundreds of rating variables used to calculate the different prices.
Two of the very current trends that are affecting auto insurance rates are the increased property damage cost and distracted driving, as the amount of sensors and electronics in cars has gone up substantially in recent years. A bumper that used to be under $1,000 to repair is now several thousand with all the backup and camera sensors in it, and a windshield that has the cameras and radar in it or heads-up display can be thousands instead of the $300 for the glass that it used to cost. The second increase in frequency is due to all the distracted driving and cell phone use that is causing accidents.
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