While insurance in general is a hot topic these days, car insurance has come into the crosshairs of our politicians. It may be about time, but what do "lowered rates" really mean?
While Ontario's provincial leaders toss around a magic 15-per-cent drop in rates, who is going to bridge that gap? The provincial government believes that savings can by achieved by attacking insurance fraud, implementing stricter benefit guidelines and investigating the towing industry. The insurance industry, predictably, is defending its turf – and profits – by advising it can't be accomplished on those revisions alone.
Insurance experts met in Toronto last week, and I spoke with Ryan Michel, chief risk officer at Allstate Canada, about changes taking place within the automotive industry, the way we are insured and the impact developing technologies will have on consumers.
The insurance industry itself is discovering the standard tropes – teenage boys drive like idiots, that's why their rates are the highest – require more explanation, and more transparency. With technology transforming what we drive – and how we drive – at increasingly faster intervals, how will the insurance industry keep pace? I want what I pay to reflect the actual risk I present, not one based on outdated data.
"New technologies take time to adopt," says Michel. "We don't prorate the latest developments, like lane departure warnings and brake assist, but as trends are noted and the data comes in, we move to have the right price and the right risk." He notes that insurance companies want to reflect price and risk correctly, both to properly provide for the consumer and to remain competitive.
With fatality rates falling, he agreed that many safety features now found in even entry-level cars (airbags, crumple zones, ABS) have played a huge role in saving lives. "While the goal is always saving lives, fewer accidents don't necessarily mean lower costs," he says, when asked why safety features that lower injury aren't reflected in savings to the consumer. "Cars have become more complex. That technology is expensive to repair, and there has been an increase in the cost to replace cars."
Sound like a watertight way to protect higher rates? Michel offered some interesting math regarding the future of car technology. I asked about the advent of increasingly autonomous cars, and that dreamed-of day when cars will drive themselves. That should leave drivers virtually blameless in the event of a crash, right?
"That would be a Utopia," he laughs. "But it will also require a partnership of government, infrastructure, manufacturers and insurers. And yes, rates would go down." The kicker? The cost of all those other things – government to lead the way to build that infrastructure that will be required so manufacturers can build vehicles that work within it – means the consumer is still paying, somewhere, all the time.
Michel says that, for insurance, if drivers are removed from the risk equation, the risk shifts to a commercial one. He likens it to a pie, with the auto portion shrinking. If you tally up the annual cost to your household insurance – auto, property, life and medical – finding a break on personal liability while driving will no doubt disappear into property increases. Those rates are being sent through the roof through a combination of the increasingly expensive recovery from seasonal and natural disasters, and people doing things like setting up house in places they shouldn't. I can't blame auto insurance providers for my property rates going up, but it's also hard to find solace in Michel's statement that he thinks auto rates will stabilize, and instead of the annual 5-per-cent increases that some have been seeing, it will be closer to 1 or 2 per cent.
The future of car technology, reduced risk, rising repair costs, insurance savings: it all comes back to costs to the consumer, and promises here in Ontario of bringing those costs back to earth.
But what about that 15 per cent? That's a political hot potato, and one the auto insurance industry apparently believes will have to be handled outside of their court. It doubts it can be done and the cynic in me agrees. Insurance companies are brushing up their reasons why rates can't be cut while the government hunts for savings elsewhere.
Insurance fraud and misconduct in the towing industry have been ongoing issues for years; does it only matter now as an election looms?
It's a pie, and we have to pay for the whole thing, regardless of how it's sliced.
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