Each year, millions of Canadians may be concerned with their auto insurance costs, and want to know all the factors that go into setting those premiums. While the obvious things like the make, model, age of the car, or the person’s driving record will obviously come into the picture, what many people might not know is that other factors – including where they live – are also considered by insurers.
In fact, recent data suggests that auto insurance quotes can vary widely for consumers based on nothing but their address, according to a report from the Globe and Mail. For instance, a 35-year-old married man with no accidents on his driving record who owns a 2012 Honda Civic living in a specific Toronto postal code could see his premiums increase by almost $1,000 per year depending on nothing but his address’s postal code.
Why is that the case?
Insurance is based on risk, so if an insurer sees that there is greater risk inherent to specific areas, it will factor that into the premiums for all people in that relatively small location, the report said. Indeed, if they could get more specific than going by postal code, they probably would, as insurers simply want to determine the best way to properly pass along costs to people who present a greater risk to them overall.
“The neighbourhood is only one factor, but one thing we found interesting is that two out of the top four [postal codes] have the most collision-prone intersections in the city,” Janine White, vice president for an insurance comparison site, told the newspaper.
“They do say most collisions happen close to home,” White added. “If a lot of people who live in the area have accidents or convictions, that will impact it.”
Other things to considerWhere are costs likely to vary the most?
People living in Ontario, however, may simply be at greater risk for filing an insurance claim anyway, which will obviously increase their costs above and beyond drivers of similar backgrounds living in other provinces, the report said. Ontario tends to have more claims, lawsuits related to them, injuries stemming from them, and more instances of auto insurance fraud as well, all of which serves to significantly increase costs for many drivers. In fact, when it comes to major population centers like Toronto, these issues may be even more pronounced. However, it should also be noted that British Columbia, Saskatchewan, Manitoba, and Quebec have public auto insurance.
In addition to all this, though, Canadians should keep in mind that there are some factors that auto insurers cannot consider when setting their rates, the report said. For example, these companies are not allowed to use a person’s ethnicity in setting premiums, nor can they base their decisions on a person’s employment status or credit history. And while they do not track a person’s driving habits, basing premiums on postal code makes sense because that gives them at least some idea of where a person will be driving pretty regularly.
Of course, a clean driving record is going to be the best way for a person to demonstrate to auto insurers that they don’t constitute much risk, the report said. Even a single accident can linger on a person’s file for years, especially if they were at fault, and that can result in much higher costs for people who aren’t careful.
For all these reasons, finding the right kind of auto insurance coverage can be crucial when it comes to helping Canadians meet all their own unique needs as it relates to both coverage and cost. By looking at all the options for auto insurance that may be available to them, they will likely get a more complete idea of what coverage should cost based on where they live and the other factors described above, helping them to become a more informed consumer so that they can make the best possible choices going forward. This is where insurance agents and quote comparisons may come in handy, as shopping around is quite likely to help find the most reasonable coverage.