If the major players in the auto insurance market in Canada could make a list of new year’s resolutions for 2020, it would likely be a long one. Consumers in many provinces would want lower prices, insurers would want more profitability in the marketplace, and brokers would want to give their clients some good news for once.
While the government in Ontario has taken steps to work with the insurance industry to come up with solutions, there’s a long road ahead for that province and many others.
“There’s still a lot that can be done and needs to be done in order for the industry to reach a more healthy state,” said Justin Thouin, co-founder and CEO of LowestRates.ca. However, he added that the trend of higher auto insurance prices is not likely to be reversed.
“One of the things that the government is really concerned about is how much consumers are paying for car insurance. Now, I think it’s somewhat naïve to think that car insurance is not going to get more expensive. If you think about everything you purchase in life, with inflation it does get more expensive over time, and if you think about vehicles in particular, vehicles are getting more expensive to fix because there’s so much more technology, whether it’s self-driving technology, or the infotainment system on your dash, or the cameras and the detectors that stop you from running into things.”
With more expensive features, the cost to fix a vehicle following an accident logically has gone up as well. In turn, it makes sense that insurance companies are going to have to charge more because when you do get into an accident, it’s going to cost more to repair the car, said Thouin. Nonetheless, he does have a few recommendations for how to relieve the auto insurance market from some of the pressures it’s currently experiencing.
“First, I think there needs to be an understanding by Canadian consumers that insurance cannot stay the same price if they’re going to have the same coverage because things are getting more expensive. But having said that, I think the way the government has looked at trying to control prices is incorrect,” explained Thouin. “We strongly believe that a free market in any industry leads to the best consumer experience and what I mean by free market is allowing insurance companies to charge what they feel is fair, depending on the different risks and the different situations because what that will lead to is competition. You’ll have an environment where insurance companies are competing against each other to win business.”
He pointed to the airline industry as an example of the benefits of that competition. If you try to book a plane ticket from Toronto to Vancouver, some airlines will offer it at $600 while others will offer a similar ticket for much less… or more.
“If it’s a robust industry where insurance companies feel like they can make money, then sometimes consumers can take advantage of those sales,” said Thouin.
More than price though, a free market economy where insurance companies compete against each other leads to a better insurance experience for consumers.
“There’s going to be more convenience because insurance is something that’s viewed as a real pain by consumers, and almost as important as price is the experience for consumers,” Thouin told Insurance Business. “If it’s easier to purchase insurance – maybe there’s more buying online technology that insurance companies are willing to offer – if it’s easier to make changes and to report claims and so on, all of these convenience options are very valuable to consumers. But insurance companies aren’t going to want to spend time in those areas unless they feel like this is a market they want to be in, unless they feel like this is an area where they can make money.”