Determining the Risk

How Insurance Companies Determine Eligibility In Ontario

Auto insurance legislation stipulates that it is mandatory that every person who drives a vehicle, has auto insurance.

In order to be fair to all applicants for insurance, insurance companies are required to file eligibility rules along with their rates to the Financial Services Commission of Ontario (the industry’s regulatory body) for approval. These eligibility rules dictate which types of drivers and vehicles a particular insurer is able to insure, and for what price.

Risk Points

When applying for auto insurance, a series of questions regarding your driving and insurance history are asked. Based on the answers, each driver is given a “report card” which assesses their potential risk to the insurance company.

This is compiled of “risk points”, and depending on the number of risk points you have, the insurance company will accept or decline to issue your insurance.

Risk points also largely determine how much premium you will pay for your insurance. Risk points work much like the demerit points you can get on your drivers license. When a driver does something that is viewed as undesirable in the eyes of an insurer, he or she is given points.

The number of points depends on the severity of the action, and the statistical relationship the action has to having a claim. If a driver has too many points to fit within an insurer’s filed guidelines, they will decline that driver’s application for coverage. Keep in mind that all licensed drivers in the household will affect the risk scoring.

Point Value

As mentioned, how many points an action, such as a ticket or accident, is given is based on its perceived severity.

Below is a chart outlining how points are currently determined with one of the insurers we place business with.

Drivers who accumulate 4 or more points are not eligible for a new or renewal policy through the group plan with Waterloo Insurance.

Risk Point Chart for Waterloo Insurance  Association Group Plan
Action	Points for drivers licensed 5 years	Points for drivers licensed 1-5 years	Points for drivers licensed less than 1 year
1st Minor Ticket in 3 years ------------------ Subsequent Minor Tickets in 3 years (each)	1 --------     2	2 --------     3	4 --------     6
Major Tickets in 3 years	4	4	4
Serious Tickets in 3 years	6	6	6
1st at Fault Loss in 6 years ------------------ Each Additional in 6 years	2 --------     4	3 --------     5	4 --------     6
Cancellation for Non-Payment in 3 years ------------------ Each additional in 3 years	1 --------          2	1 --------     2	1 --------     2
Non-Disclosure, Auto Insurance Fraud or Material Misrepresentation in 10 years	20	20	20