Insurance Corner
Keeping auto insurance rates down

Insurance companies in Ontario must apply to the provincial government for approval to raise or lower auto insurance rates. A provincial body called FSCO (Financial Services Commission of Ontario) will review the financial standing of the insurer to determine if the change in rates is warranted. In an effort to protect the public FSCO monitors an insurance companies ability to pay claims.

Insurance companies must meet strict financial conditions or face a penalty. Farm Mutual Insurance Companies must have one dollar in the bank for every two dollars of written premium and private insurance companies are subject to a one to four ratio. When insurance companies lose money their reserves shrink and they are forced to reduce their volume. We are currently experiencing a soft market in which the industry is profitable averaging a return on equity of 8.4% per year for the five year period ending December 2005. As a result most insurance carriers have been filing for rate reductions over the past eighteen months. The cycle will turn around again and the market will harden forcing prices up.

When determining auto insurance premiums some factors considered are the use of the vehicle, territory, distance driven, type of vehicle, coverage’s required,

age of driver, prior insurance experience, policy cancellations, years licensed, at fault accidents, tickets or other traffic violations.

Some tips on how to keep your rates in check are:

1. Never allow your policy to be cancelled for non-payment. Always go to your broker’s office and sign a cancellation request. Putting a stop payment on your monthly withdrawal will be considered a cancellation for nonpayment and could cost you dearly.

2. Just one minor ticket no matter how minor could increase your premium. I don’t know how many times clients have stated that the police officer suggested a ticket will not increase insurance premiums since there were no demerit points applied to their drivers license. Well I am telling you that is not the case. You could lose a conviction free discount or your driving record could be reduced for one minor ticket.

3. You lend your car to a friend who gets into an at fault accident and you could pay higher premiums for at least the next six years.

4. Purchase the Accident Forgiveness Waiver if offered by your insurance provider to protect your driving record in the event of an at fault accident.

5. Avoid an accident by giving yourself a few extra minutes to get to your destination especially when road conditions are poor.

6. Disclose all information accurately when completing an application for automobile insurance including drivers in the household or business, traffic violations, claims and cancellations of auto insurance. Insurance companies can cancel a policy for material misrepresentation when certain information is not disclosed on the application. When this happens you may be forced to pay premiums in the high risk market.

This article is for information purposes only. Please check with your insurance provider to verify that you are properly insured as policy wordings & limits may differ from one insurance company to another.

Mark Guergis , CAIB

Registered Insurance Broker

Aim Insurance Brokers Ltd. 705-431-5622

General insurance brokers with offices in Innisfil and Angus. We will provide material from within our office and other members of the industry to hopefully help you have a greater understanding of home, auto, and business insurance products.