Governments should stay out of insurance pricing: LowestRates.ca CEO

Rate comparison site co-founder shares his thoughts on auto insurance in Ontario and Alberta

Distracted driving, costly vehicle repairs and fraud have combined to make it hard for auto insurers to make a buck. It’s even harder when regulators in provinces like Alberta and Ontario limit what insurers can charge, says Justin Thouin, CEO of LowestRates.ca.

“Insurance companies are for-profit enterprises. They need to make money, and it’s not fair for governments to mandate pricing on them that does not allow them to make a profit,” Thouin told Canadian Insurance Top Broker. “The government should not get involved in limiting what companies can charge.”

With many insurers losing money on auto, speculation abounds about whether some might pull out of certain markets altogether.

Related: Explaining auto insurance rates to clients

“I don’t think that’s what they want to do, but if I were running a business and I was not able to make money—and I didn’t see a way to make money—then I’m not sure what else I could do,” Thouin said. “Something has to give. Either the insurance companies need to be able to charge consumers what they see fit and allow it to be a free market economy, or the actual amount they pay out on claims needs to go down.”

And that’s where Thouin believes governments might be able to help insurers: by cracking down on fraud and distracted driving, rather than focusing on rates.

“I think these are two areas where, if the government does want to get involved in auto insurance, it would be a better place to get involved than in setting and approving pricing,” he said. “And how can they get involved? Massive punishments and penalties for perpetrators of fraud and distracted driving.”

If regulators continue to restrict what insurers can charge, Thouin predicts that some drivers will have trouble getting insured at all—or, at the very least, they’ll be stuck with an inferior insurance product.

“It’s a slippery slope, and I fear that it’s going to be a negative situation—specifically in Alberta right now, and shortly thereafter, Ontario—where people are going to have a very hard time getting insurance. And the people who do get insurance are going to have much lower quality service, convenience and innovation, because the companies are begrudgingly working in those markets, as opposed to trying to create products that delight consumers and are better than their competitors’.”

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