The current situation with insurance rates in Canada has been called "insane" by a highly informed industry insider, and if you think the description sensationalistic, consider this:
A driver with an accident-free record for 20 years can report a crash to his or her insurance company that cost $1,500 to repair and end up paying more than $30,000 in extra insurance premiums over the next six years. In that situation, it would be cheaper for the driver to scrap the crashed car (without reporting it to their insurance agent) and buy a new car rather than pay for insurance on the old one.
On the other hand, if you don't report a crash to your agent and pay for the repairs yourself, you are technically in breach of the contract with the insurance company and might be denied coverage when you really needed it.
This situation was outlined by the person who called the situation "insane" --Lee Romanov, the president of InsuranceHotline.com, a Toronto-based online agency that provides drivers with a way to find the best insurance rates for their specific situation.
By checking the affect of a small crash on real-world insurance rates with large Canadian firms, Romanov made it clear how pricey insurance has become. She asked various insurers to quote on the premiums for a 35-year-old Toronto man who'd been driving crash-free for 19 years.
In Romanov's example, this person drives a 2000 Ford Explorer SUV with four-doors and all-wheel-drive. This person does a 10-km one-way drive to work every day, and puts 10,000 km a year on the vehicle. He has standard coverage, which means $1 million liability, $500 collision deductible, and $300 comprehensive deductible.
After informing his insurance agent about the $1,500 crash, this driver's insurance rates would go up anywhere from $1,683 to $5,246 a month for 72 months, or $10,122 to $31,476 in extra premiums.
As a result of this, lots of people are apparently not telling their insurance agents about minor crashes and paying to have the work done themselves, or not having the repairs made at all.
Often, consumers are not going to big repair shops to have the work done, but are instead going to places that the repair industry calls "backyard" shops.
According to Bob Mauro, of Maaco Systems Canada Inc. of Mississauga, Ontario, , there are hundreds of backyard shops in Ontario alone, "and they are the scourge of the industry. They endanger the environment and staff alike with their unsafe practices and lack of equipment, and that doesn't even mention the grey market impact on the tax base of the municipality, province and country."
On top of that, of course, companies like Maaco, which Mauro says takes in about half of the repair business in North America, and the Hamilton, Ontario-based Carstar Automotive Canada are losing significant parts of their business.
According to Mauro, reliable industry sources identify the erosion of market share for "insurance-driven body shops" to be in the 35 percent range, which is "very serious indeed."
These sources have also "identified the fact that those same shops are struggling with the steep learning curve of user friendliness and production line shop layouts to try too emulate Maaco."