Insurance Rates
Ok. A primer on insurance policies. (for the lawyers among us, LOL, AS I UNDERSTAND IT, not to be taken as professional advice)
How are 'raw' costs determined?
Obviously other than profit margin, costs are assessed by probable pay out or in other words, total liability.
In the U.S., it is legal to carry as little as $200,000 in liability coverage. This is the key sum.
Its the one that pays if you kill the other driver/passengers etc.
In Ontario, is the LAW that you carry $500,000, but you will not find an insurance company willing to insure you with less than $1,000,000 in liability.
That accounts for a big chunk of the cost difference.
Liability in Ontario means any medical expense, but also any non-medical expense incurred as a result of your accident, and that you have to pay for lost income and caregivers and so on.
Never mind "pain and suffering* awards.
Within the rate calculation; there are certain assumptions.
You will notice numbers on your policy.
I believe its veh, Coll, Comp.
This means the likelihood of someone driving your type of car x the average amount of damage in an accident (coll) or a theft/vandalism (comp)
Then you add in a factor for driving ability.
Embedded in those costs are the fact that if you car is stolen/vandalized there is usually no one to sue.
And if you get into an accident with a drive w/no insurance, there is effectively no one to sue ( you can't claim assets that aren't there), but your insurance will still look after you, even if the other guy was at fault.
Also, the way Ontario insurance works, the other's guy insurance only pays for liability claims (even if he's at fault) your insurance company is always responsible for any damage to your vehicle.
That has the effect of driving down bad driver rates, and driving up good driver rates.
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Now a secondary factor to consider is that all insurance companies take your money (premium) and invest it, in stocks, real estate etc.
Generally speaking, during good times, your insurer's let rates stay flat or even cut them marginally, because the stock market and real estate prices are rising giving them free money.
When the markets go south however, the not only don't get 'free money' they show a loss; and they're potentially showing insolvency if the losses are bad enough; so premiums must rise.
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Finally, in Ontario we do have a one particular bad driver penalty.
It is illegal in Ontario for the Insurance companies not to offer you insurance, not matter how badly you drive, if you are a legal driver.
If you have 3 at fault accidents, and 10 tickets, but you have a valid license, they must insure you.
This is done under a system called 'facility' in which the major insurers in Ontario all pay in and jointly administer and eat the losses for this type of policy.
The premiums are much steeper and are meant to discourage certain people from getting insurance (or driving);but typically 4k - 10 k per year.
But a number of drivers do accept the policies and invariably any cost overruns for facility insurance are born by good drivers.
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Whew. Done Babbling.
