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December 22, 2020

Toronto asks: Does location really matter for auto insurance?

4 min read


Location, location, location. You’ve heard it a million times, usually with respect to decisions involving real estate.

It matters just as much when it comes to auto insurance. Where you live and work has a real measurable impact on how much it will cost you to insure your vehicle.

So why will you pay more to insure a vehicle if you live in downtown Toronto instead of a more rural town? In a word, traffic. And in another word, risk. Risk, of course, is the foundational premise of the entire insurance industry. More risk equals a greater likelihood of an event that brings insurance claims into the equation. Any time you drive in a city, whether to work or for daily chores, you’re sharing the city’s infrastructure with hundreds of thousands of other motorists. The likelihood of an encounter with another driver is much greater when your environment is chock-full of cars, as opposed to the relative traffic tranquility of a country road. You may only pass 10 cars on the entire trip to your place of work if you live in a rural setting. In a city, you may very well pass that many cars just getting off your side street onto an arterial road.

The stats don’t lie

You may have heard the old adage about how you can tell an actuary some basic information about yourself and he can tell you a wealth of information about you: your income, your marital status, your education level, and even your approximate life expectancy. This is possible due to the accumulated wisdom offered by trends and patterns, and what they predict. The insurance industry has been capturing and analyzing data on auto insurance claims for many years, and the evidence is crystal clear: reports of accidents, including minor fender benders, are significantly higher per capita in metropolitan areas than they are in rural settings. Therefore, insurance policies have built into their cost the reality of higher risk of collisions and higher cost of settling claims that occur as a result of city driving.

Although the obvious answer relates to frank numbers, there are additional, related factors that mean higher insurance rates for city drivers. What makes city drivers more likely to have collisions, beyond the sheer frequency of encounters with other vehicles? The volume of traffic on Toronto’s streets and highways has increased substantially with population growth, urban sprawl, and dated infrastructure that struggles to contain increased capacity. The effect on drivers has been to increase their commuting times. In one study, researchers found Toronto commuters spend close to an hour and a half each day travelling to work or school. With more people stuck in traffic, it seems likely they will be less patient, more distracted, and generally more stressed, none of which are conducive to safe driving behaviour. It would be surprising if such conditions did not lead to more vehicle collisions. Add in a fairly ubiquitous use of cell phones and texting and you can see why driving in Toronto might come with a premium cost. Toronto drivers also navigate a road system that was not designed for the multi-modal transportation model it has become today. Uber delivery cyclists, dedicated bicycle lanes, and slower-moving e-bikes now vie for shared space. The combination and totality of these variables is practically a recipe for collisions, and hence, higher auto insurance rates for those drivers. To be sure, rural driving has its own set of risks and challenges (e.g., more frequent wildlife encounters, darker diving conditions, higher driving speeds), yet the numbers are of a different order and magnitude compared to city driving.

“Toronto The Good?” Not so much for good Ontario drivers

The Insurance Bureau of Canada published a study in 2012 that reviewed the design of auto insurance systems in Ontario, comparing the performance of auto insurance in Ontario to other provinces. Interestingly, Ontario was found to have the lowest fatal accident rate and one of the lowest rates of accidents causing injury of all provinces. This was contrasted against Ontario having the highest claim frequency and high claim severity, compared to other provinces. The explanatory missing link here was the impact of driving in the Greater Toronto Area, due to increases in both claim frequency and claim severity for these drivers.

An additional factor may be related to the disproportionate number of fraudulent auto insurance claims in the GTA—the report above noted that although the GTA accounts for only one-third of all insured vehicles, it accounted for more than 80% of the growth in accident benefit claims. Of course, bear in mind that there are other factors in play that impact auto insurance coverage costs, but they are not under an individual motorist’s control or related to their driving behaviour (such as developments in tort law or changes in government or industry regulations).

What is a good and responsible Toronto driver to do?

One of your best bets is to seek a quote from of a well-regarded insurance broker, such as Mitch. We have the tools to help you find a quote that reflects your situation and driving history. Let us shop around and find a quote that meets your needs and saves you a few bucks in the process. In terms of practical matters, you can do your part to make sure you’re well-covered for auto insurance as a Toronto-based driver:

  • Get educated: an accredited driver’s education program can save you on rates and save your life. You’ll learn valuable tips and strategies on defensive driving and accident avoidance.
  • Keep calm and carry on: first you can accept that driving in Toronto is a busy and dynamic experience, and then you can prepare yourself accordingly. You’ll get there when you get there, so budget enough time for your trips that you don’t feel rushed or harried. A stressed, distracted, or agitated driver is not a safe driver, so find your happy place and relax.
  • Maintenance matters: keep your chariot in optimal condition with frequent service and inspection, paying close attention to braking systems and tire wear. A good and honest mechanic on your team can be a major asset when it comes to preventative medicine.
  • Be strategic: if you can avoid taking unnecessary car trips, do so. Combine chores into one fell swoop and, if possible, avoid being on the road during peak traffic periods. Given some of the effects on the workplace from the Covid-19 pandemic, it may be possible to work more frequently from home, thus avoiding driving entirely. Or if you want to take strategy a step further, consider the car you’re driving. Different cars are assessed differently for the purposes of insuring them, covering a number of factors, such as safety features, cost of repairs, and theft rates.

There’s no getting around it: city driving comes with extra costs and risks across the board, so the best you can do is explore policy options through different insurance providers via Mitch Insurance, and then do your part by driving as responsibly and competently as you can.

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author avatar
Al Maggi Writer

Al Maggi is Mitch's senior writer and content editor. Al works closely with other members of the Mitch broker and executive team to make complex insurance topics understandable, and simpler ones interesting and informative.

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