When Pankaj Sallh and his family moved to Brampton from Mississauga last year, he had no idea that changing his postal code would be so costly.

The relocation resulted in a nearly 50 per cent increase in his car insurance with the same company, from $237 to $350 a month for two vehicles.

“To me, it’s unexplainable,” says Sallh. The 44-year-old engineer and his wife support two small children, as well as his parents and father-in-law. “Why should I pay more just because of the change of address?”

The increase is due to what critics call “postal code discrimination,” which is the subject of a bill that could come up for its second reading in provincial parliament as early as this month. If it passes, it will then be studied by a legislative committee before a third and final reading.

Bill 42 seeks to remove geography as the primary factor in determining what you’ll pay for your car insurance in Ontario and rescinds a regulation that mandates the number of territories that insurers must have. The bill was carried on its first reading last October.

Parm Gill, the Conservative MPP from Milton, launched the private member’s bill after hearing complaints from constituents who moved from one place in Milton to another and discovered their car insurance was going up — a lot.

“Much like the rest of Ontario, Milton drivers are paying too much for auto insurance,” says Gill in an email to the Star. “If this bill is passed… Ontario insurance providers will be able to put more emphasis on a driver’s record, not their postal code.”

Insurance companies use numerous factors to determine an individual’s risk, including age, gender, marital status, driving record, if you use your car for work and how many kilometres you drive in a year. They look at the make of your vehicle and the claims they’ve had for that type of car.

But geography — which they refer to as the location where the car is garaged — seems to trump them all.

“If (your car) is being used in an area that has a higher incidence of accidents and a higher payouts of accidents, then that is typically a riskier venture than someone operating a vehicle in an area that doesn’t have the same risk exposure,” says Joseph Carnevale, a broker who is the president-elect of the Insurance Brokers Association of Ontario.

“Insurance companies have told us that is the most effective way of anticipating whether someone is going to have a claim, or not, and how expensive it’s going to be,” he says.

Brampton East MPP Gurratan Singh, the NDP critic for car insurance, also proposed a bill last year to eliminate the use of postal codes as a risk factor, but it was voted down.

Currently, the Financial Services Commission of Ontario, which regulates insurance, allows companies to have a maximum of 55 “territories” in the province, with up to 10 of those in Toronto.

Territories are defined by insurers, and most insurers use postal codes to determine their boundaries. In territories where there are more accidents and higher claims, rates are typically higher.

A broker who plugged in her driving history and make of car for the Star — to get quotes using software that spits out rates — found that her insurance doubled not only in Brampton, but also in many of the postal codes that are the highest in the GTA, according to data provided by LowestRates.ca.

Removing the territory requirement, “coupled with the direction to… (FSCO) to prohibit insurers from using factors primarily related to one’s postal code or telephone area code when calculating premiums, will result in a more competitive system,” Gill says in an email. “Insurance providers will now compete for drivers, not geographical areas in the province.”

An Aviva Canada insurance spokesperson says that geography is “an important and predictive indicator of your chances of being in an accident,” but that it is just one of many factors that contribute to the cost of car insurance.

The company says if FSCO allowed more factors to be included, it could lead to a decrease in rates for lower-risk drivers. The company declined to say what the new factors would be because it is in talks with the Insurance Bureau of Canada and the insurance regulator.

“Allowing insurance companies to use all appropriate data, rather than the restricted set we are forced to use today, will create less subsidization (so every driver pays their fair amount) and a greater variety in pricing,” according to the spokesperson. “Consumers can then shop for the company that offers the right coverage and service at the best price.”

In 2015, Ontarians had the highest auto insurance premium in the country — an average of $1,458 per vehicle, according to a report in 2017 written by government adviser David Marshall.

The province has been looking at some type of reform, and has met with insurers and the brokers association as well as others in the industry. The public had until the middle of February to weigh in. A new regulator — Financial Services Regulatory Authority of Ontario — is being set up and will take over most of FSCO’s responsibilities. The regulator lists a number of priorities including supporting an auto reform strategy and streamlining the rate regulation process.

Allowing proof-of-insurance pink slips to be sent electronically — as opposed to mail — and changing the onerous documentation needed by insurance companies to apply to the regulator for rate increases, could be two of the changes that will decrease costs for companies and which brokers say could translate to lower premiums.

“We are working with stakeholders across the auto insurance system to explore options to lower rates in a responsible way, while ensuring that the needs of the people are served,” says Peter Spadoni, a spokesperson for the Ministry of Finance, in an email.

“Ensuring fairness in auto insurance rate setting and ending discriminatory practices is a goal of this government,” Spadoni says. If the private member’s bill passes, it would “eliminate the unfair practice of discriminating against drivers simply based on where they live,” he says. “This bill, if passed, would create a fairer market for consumers and more consumer choice. This bill also promotes personal responsibility.”

No time frames or dates for any announcements have been set, he says.

However, experts say eliminating the use of postal codes is not going to drive insurance rates down overall. If rates go down for drivers in areas that currently have higher average premiums, they’ll most likely go up in areas with lower ones, which is largely the remainder of the province outside the GTA.

“It’s a zero sum gain,” says Adam Mitchell, whose Whitby company, Mitchell & Whale Insurance Brokers, was voted broker of the year in 2018. “If there were $1 billion of accidents last year, there will be $1 billion of accidents next year. Nothing in this bill is going to make less accidents,” he says. “All you’re saying is the location of who should pay for those accidents should be a more muted and less accurate representation.”

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Auto insurance in Ontario has been a thorn in the side of successive governments since it became mandatory in 1980. It began largely as a tort-based system, with lawyers representing most claimants, according to the report written by Marshall. There were minimal accident benefits.

No-fault insurance, with expanded benefits, was introduced in 1990 to rein in costs due to expensive litigation and settlements. Since then, governments have tried numerous measures to curb increases, including changes to accident benefits and rights to sue, setting maximum fee schedules for health care providers, freezing premiums, capping the cost of medical assessments, limiting fraud and introducing a new dispute resolution system, according to Marshall’s report.

“We’ve had major reforms 10 times maybe since 1990,” says Mary Kelly, a professor in finance and insurance at Wilfrid Laurier University. “I’m not sure how they’re going to reform the product. My colleagues and I like to call it a game of regulatory whack-a-mole,” she says. “Oh, we’ll put a Band-Aid on this… a Band-Aid on something else that pops up. Then two more things pop up… That’s what Ontario auto is.”

Marshall, who was appointed as a special adviser by the government to review Ontario’s auto insurance system, wrote in his report that about a third of benefit costs, about $1.4 billion a year, is going to lawyers, experts and insurer costs to defend claims, instead of to treatment. Insurance companies told him that 25 to 35 per cent of claimants hire a lawyer at the time they file a claim or soon after.

He made a number of recommendations, including ones that would reduce the need for litigation, and said the insurance regulator should establish treatment programs for the most common types of injuries.

Others believe the high cost of insurance is due to an industry that is making excessive profits.

A report last year by York University professor Fred Lazar, which was commissioned by the Ontario Trial Lawyers Association, estimates that from 2011 to 2016, insurance companies made $5 billion in pre-tax income, which translates into an average premium overpayment of $143, year over year, for drivers.

But Kelly, who is a professor and chair in insurance, disputes that.

She says statistics show that about 70 cents on every dollar paid in premiums goes to settle claims, another 10 to 12 per cent is paid off the top in commission and the remainder goes to pay taxes and run a company.

“Insurance companies aren’t getting rich off of Ontario auto,” she says.

Instead, the increase in premiums could be due to two trends that FSCO says it is monitoring — distracted driving and expensive car repairs.

The regulator awarded an 8.75 per cent increase in insurance rates in Ontario last year based on detailed submissions by insurance companies asking for increases.

The number of distracted driving infractions has fallen steadily in Toronto since 2014 when police issued 11,445 tickets for the use of hand-held wireless communication devices. That number dropped to 9,022 in 2018.

But Aviva analyzed hundreds of thousands of claims from 2016 to 2018 linked to it — such as rear-end impact, changing lanes, improper passing, collision with fixed object, failure to obey traffic light or sign and a single-vehicle accident — and estimates distracted driving increased 12 per cent in Ontario over that time period.

And replacing technology in cars contributed to a $535 million increase paid out by Canadian insurers in the first quarter of 2018, compared to the same time period a year before, according to Audatex, a company that streamlines claims processes.

Aviva also says fraud — related to inflated repair costs — could be driving up the cost of auto insurance.

Whatever the reason, Joseph Carnevale of the provincial brokers association is concerned that when the government talks about “choice,” as they have in discussions with the association, they might look for a quick fix to bring rates down by allowing drivers to opt out of accident benefits, one of the four mandatory parts of a driver’s policy. He says eliminating benefits could see the cost of a policy drop by 40 per cent.

“On behalf of all the consumers in Ontario, we would have a big concern about allowing people to opt out if they couldn’t demonstrate they didn’t have other means to protect themselves. And currently there is no other means for a number of people,” Carnevale says.

“Choice is great as long as people have an informed choice and have alternative measures to protect themselves,” he says. “If all we’re doing is giving choice to people at the bottom end, who can’t afford the insurance and that’s why they’re opting out, then they really don’t have a choice in the matter. They’re going to elect for the lesser coverage.”

He says it could impact a generation of drivers who wouldn’t have the coverage they need to deal with their injuries.

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