How car insurance works in Canada
Car insurance is mandatory in all provinces and territories.
There are serious consequences if you drive without insurance. This includes freezing your license, confiscating your car, and fines. In Ontario, fines range from $5,000 to $50,000; in Alberta, fines range from $2,875 to $20,000.
In addition, your insurance premium will increase (the larger the fine, the more significant the increase).
So why aren't other forms of insurance, such as life insurance and home insurance, legally required? Car accidents have an impact on society. Without mandatory insurance, victims are unlikely to be able to access essential support. Having a clear system for resolving disputes also ensures the courts don't get stuck.
Regulations at the federal and provincial levels
Insurance is regulated at both the federal and provincial levels.
Most of the property and casualty insurance industries are regulated by the federal government. The Insurance Companies Act governs all federally registered or registered insurance companies in Canada.
The Financial Consumer Authority of Canada (FCAC) is responsible for administering the parts of the Act that relate to consumer rights and monitoring insurers' compliance with the law.
The Financial Institution Superintendent's Office (OSFI) regulates the solvency and sound finances of property and casualty insurance companies.
Then, each province and territory has their own Insurance Superintendent. These bodies regulate the products offered by insurance companies and their behavior in the market (underwriting, valuation and marketing practices, and their handling of claims). The Ontario Financial Services Regulatory Authority (FSRA) regulates the auto insurance industry in Ontario. Alberta's equivalent is the Alberta Automobile Insurance Rate Board (AIRB).
Private and public auto insurance market
Canada has a variety of insurance markets. Provinces decide what delivery system they prefer, which is why some have private insurance markets (where you buy insurance directly from the company of your choice), and others have public insurance financed by taxpayers.
In public systems, insurance is provided by state-owned companies (B.C., Saskatchewan, and Manitoba). Automatic registration is done when you register the vehicle.
The Quebec system can be described as quasi-public. Here, the public insurance company only arranges insurance for bodily injury, while physical damage and liability are handled by private insurance companies
Provinces with private auto insurance systems (Ontario, Alberta, all Atlantic counties and provinces) have laws preventing drivers with poor driving records and insurance from being denied insurance coverage. This is called the "all-comers" rule.
The all-comers rule aims to eliminate business practices that prevent problem drivers from getting offers.
However, if you have a history of poor driving and insurance, your insurance company may accept you as a customer - but your premiums will be significantly higher than those of the average driver.
The differences between the provinces do not stop there.
Tort vs no-fault insurance
Tort insurance used to be the dominant claim settlement method in Canada.
Tort is a legal concept for an unlawful act that causes pain and damage to another person through negligence.
Under the tort auto insurance system, some accident insurance benefits are included in a standard policy, but they are limited compared to benefits under a no-fault system. If you were injured as a result of someone else's actions, you must sue to cover your costs.
No-fault coverage means you get comprehensive benefits regardless of who is responsible for an accident. In return, your right to sue for pain and suffering is limited.
Ontario, Nova Scotia, New Brunswick, Quebec, P.E.I., and B.C. operate under no-fault system.
Until recently in Saskatchewan, you could decide whether you wanted a tort accident or no-fault benefit plan.
Alberta does not fall into the no-fault or tort category. It's a mostly tort-based system with some aspects of a no-fault system. In 2022, the province is introducing direct property damage compensation (DCPD), meaning your insurance company will pay for the repair of your vehicle if you are not responsible for a collision (no need to involve a lawyer). This type of coverage is usually only found in provinces with no-fault frameworks.
On the other hand, you can sue the party liable for damages in Alberta (a key feature of the tort approach).
Geography and auto insurance
To obtain more detailed information, insurance premiums are determined by geographic boundaries.
Most insurance companies use postal codes to determine these limits. However, provinces can step in and impose restrictions on the assessment area.
Types of auto insurance coverage in Canada
Because you can't legally operate a car without insurance in Canada - driving is a risky activity
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