Devious ways your clients are trying to get better auto rates

Territorial ratings have prompted some Ontario motorists to lie about where they live on their applications in order to get a lower auto insurance rate, so brokers need to caution clients on the importance of telling the truth, a local broker association director warns.

Insurers recognize that drivers filling out an insurance application may be tempted to claim they live in a small town in rural Ontario, and thereby “save a ton of money,” Joe Carnevale, associate broker and director of sales for Concord, Ont.-based Brokers Trust Insurance Group Inc., told Canadian Underwriter recently. He is the director of Territory 10 (Metropolitan Toronto and York region) for the Insurance Brokers Association of Ontario.

This is because territory – in essence, where the car is used, and where it is parked when it is not used – is one way auto insurers determine premium.

Ontario in recent years has had the highest auto premiums in Canada, wrote David Marshall, special advisor to Finance Minister Charles Sousa, in a report released in 2017. “When people find that their rates are going up they look for creative ways to get a lower rate, artificially,” he said. “The industry has caught on to that.”

Before the Ontario election, political parties commented on the difference between urban and rural insurance rates. The Ontario PC Party and the New Democratic Party have gone so far as to say they would abolish territory as a rating factor for calculating premium if elected. During the election, neither party has emphasized this aspect of their platforms.

Ontario motorists living in densely populated areas tend to pay more for auto insurance than if they lived in sparsely populated areas, brokers have told Canadian Underwriter. The rationale is simple: more traffic generally translates into a greater collision risk.

The fact that some clients lie about their address is a symptom of the public’s frustration with higher auto insurance rates, suggested Carnevale.

The Financial Services Commission of Ontario said the average premium went up 1.03% in the fourth quarter of 2017 and up another 2.23% in the first quarter of this year. A government attempt to cut the average premium by 15% between 2013 and 2015 failed.

Carnevale said he asks some customers what “security” they would have, in the event of a claim, if they put a false address on their application for auto insurance. He suggested “the bigger the claim,” the harder the insurance adjuster will work to verify that the claimant’s application information is correct.

If a claims adjuster finds that a claimant has lied on their application, this “would have severe ramifications for long term,” Carnevale advises clients.  Instead of saving a few thousand dollars, a claimant who is found to have lied on an application for auto insurance could be out of pocket more than $1 million because their claim was denied.