Car Insurance Premiums
Auto Insurance Rates and Postal Code Discrimination
November 28, 2018

Auto insurance rates have been a hot political topic in Ontario for many years. For instance, one or more political parties have promised the reduction of auto insurance rates as part of their election platforms. These ideas include Government run insurance systems and laws that require the reduction of auto insurance premiums by 15%. The latest idea is to end “postal code discrimination”.

What is postal code discrimination?

Have you ever heard stories where people have moved across town and their auto insurance rates went up? More importantly, has this happened to you? The politicians call this “postal code discrimination” and would like to see this practice ended in Ontario. However, the insurance industry calls this “territorial rating. Ontario is divided into territories and each territory has it’s own auto insurance rates. In reality, there is no discrimination because insurers don’t come up with auto insurance premiums without using a large amount of data.

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What is the difference in auto insurance rates by territory in Ontario?

We know insurance companies divide Ontario into territories and auto insurance rates differ from one territory to the next. But is there a real difference in premium between territories or are the premiums in each territory more or less the same?

The table below shows the annual auto insurance premium from one insurance company across a number of territories. The premium is based on a 40 year old married male with a clear driving record who drives 15 kilometres to work and 25,000 kilometres each year. The vehicle is a 2016 Toyota Camry LE 4 door and coverage is $1,000,000 liability with a $1,000 deductible for collision and comprehensive coverage. The auto insurance rates do not include discounts.

If you compare the highest premium in Brampton with the lowest premium in Kingston, there is a very large difference in auto insurance premiums. However, if you compare the premiums in the large cities expect for Brampton, the premiums are close. The same can be said for the smaller cities.


City (Postal Code)Annual Auto Insurance Rates
Barrie (L4N)$1,705
Brampton (L6R)$3,230
Etobicoke (M8Z)$2,135
Hamilton (L8V)$2,147
Kingston (K7L)$1,219
London (N5Y)$2,163
North York (M2N)$2,385
Oshawa (L1H)$2,028
Ottawa (K1Z)$1,441
Peterborough (K9J)$1,462
Sault Ste. Marie (P6B)$1,484
Thunder Bay (P7C)$1,434
Toronto (M5E)$2,426

Will eliminating postal code discrimination lower my auto insurance rate?

Eliminating the postal code system will not make insurance cheaper for everyone because it does not change the total costs to the insurers (repairs, injuries and fraud). If you live in an area with high auto insurance rates like Brampton, you might see your auto insurance premium decrease but others will see an increase to make up for the lost premium.

One of the best ways to lower auto insurance rates in Ontario is to take on insurance fraud. According to the Insurance Bureau of Canada, “auto insurance fraud costs Ontario drivers an estimated $1.6 billion each year. This means that $236 of a driver’s auto insurance premium pays for the illegal activities of fraudsters. The bottom line is: They cheat, you pay.”

Technology could also help to change the way auto insurance rates are determined. New technologies such as telematics and pay-as-you-go-insurance will allow insurers to track an person’s driving habits. Unfortunately, the technology is in the early stages and we will likely not see it used by the insurance industry in the near future.

Clearly, the insurance companies and politicians have a lot of work to do to make the calculation of auto insurance rates in Ontario fairer for everyone.

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