Insurance rates are determined based on a variety of factors, including your age, sex, location, driving history, and marital status, including many others. Groups that are determined to be at higher risk of being in or causing an accident, based on insurance actuarial tables, are generally given the highest premiums.
In Ontario, young men aged 16-24 are considered the highest risk, and therefore insurance rates begin much higher, with a yearly premium of up to $10,000 not uncommon. This is in stark contrast to other provinces, which determine rates based primarily on driving history and car usage. As a result, some believe the Ontario insurance structure to be both discriminatory and punitive.
Others point to inefficiencies in insurance companies as being a primary culprit, particularly as insurance companies tie up immense resources by denying claims and leaving themselves open to lawsuits and arbitration hearings as a result.
The insurance companies themselves, on the other hand, would point to auto insurance fraud, a problem estimated to cost the province over $1 billion, with that number translating to an increase in insurance rates of between $116 and $236 per year.
One possible solution to this problem that has been proposed is the institution of usage based insurance. In this system, rates would be calculated, not by risk factors, but by how frequently and how safely each individual uses his or her vehicle. GPS tracking devices in your car would calculate your driving habits, including distance driven, time of day the car is used, sudden stops and accelerations, and speeding, and would offer good faith discounts to those who demonstrate safe driving habits.
Insurance companies and other groups that champion this system note that this system would make insurance rates fairer, more meritocratic, and would even provide an incentive for drivers to be safer on the roads, leading to fewer accidents overall. But some also argue that while usage-based pricing systems may help lower rates, it would also require cooperation from the government to improve roads and driving conditions to ensure accident rates are lowered.