IBAO urges FSCO to be cautious over potential changes to postal code-based auto insurance prices

Published: December 13, 2017

Updated: July 24, 2018

Author: Luke Jones



One major determining factor behind auto insurance rates is home address. As a broad example, if you live in Toronto, you pay more than you would if you lived in North Bay. Assessments are more nuanced, including postal codes in the same city paying different premiums rates. Customers generally dislike this model, the Insurance Brokers Association of Ontario has urged the province’s regulator to think twice before making any changes to postal code-based assessments.

On December 5, Ontario Finance Minister Charles Sousa said the Financial Services Commission of Ontario (FSCO) is “to review risk factors used by insurers to calculate premiums with the goal of ensuring drivers in certain parts of the province are not subject to unfairly high rates.”

Any assessment model to decide auto insurance “should be reviewed on a regular basis to make sure it is still appropriate,” IBAO CEO Colin Simpson said on Monday. Despite welcoming reviews, the IBAO says the FSCO should be cautious when considering changes to the postal code model.

The brokers association is worried about the impact on consumers if a change is made. For example, for customers in high-risk areas, “there has to be a corresponding increase somewhere else, unless you are going to put strain on the insurance companies’ balance sheets, which I don’t think is in anyone’s interest,” Simpson said.

“We want to ensure that costs are actually taken out of the system,” Simpson added.