There goes the neighbourhood
By John Paul Hogan
jhogan4@uwo.ca
Joy Hunter had lost count by the time she pulled up for her appointment on Taylor Street.
How many apartments had this been? It seemed like dozens. But so far she hadn’t seen anything that made her feel good about moving.
Taylor Street was a gamble. She hadn’t planned to look East of Adelaide, but the last four weeks of searching told her she needed to consider different options.
It didn’t take long to fall in love. It may have been a basement apartment but the huge windows made it seem to be only halfway underground. The place was clean and large, a combination that had eluded her budget until then.
“I think I caught the owners by surprise when I asked to take it right away.”
Hunter moved onto Taylor Street in July 2007 and hasn’t once regretted her decision.
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Photo by John Paul Hogan
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| Joy Hunter says she likes her east end neighbourhood, but not the higher car insurance rates. |
“This place has been great. My landlords are great and I love the neighbourhood.”
But this January she got the distinct impression her car insurance company didn’t share her love.
During a phone conversation with a company representative, Hunter realized they still thought she lived in Masonville.
“When the girl on the phone realized I’d moved she said, ‘This puts you in a new postal code and a new territory,’ I had to ask her what that meant.”
What it meant was a $49 per month increase in Hunter’s premiums. Moving from Masonville to Taylor Street brought with it an unexpected yearly cost of $600.
“Simply because I live one block EOA doesn’t put me in a stereotype. It’s a nice neighbourhood with good people. It’s not a reckless place to live.”
But East of Adelaide has its reputation: crime, poverty, neighbourhoods in disrepair. The long-standing symbolic dividing line has separated the good part of town from the bad for most of the city’s history. And for years, the 40 per cent of Londoners who live East of Adelaide have tried to shed that reputation.
But is that reputation costing them more than just pride?
London police refute the assumption that EOA’s higher crime rates are to blame.
“The London Police Service doesn’t keep statistics about where car thefts or break-ins happen most in the city. And we don’t share crime statistics with insurance companies,” said Const. Amy Phillipo.
Instead, insurance companies rely on their own data in a particular neighbourhood to get a picture of risk.
“Rates are set depending on loss experience. The company looks at how many thefts and accidents have happened in that area and compares them to other territories,” said Lisa Lafreniere, an insurance broker with State Farm in London.
She explains that each company sets up its own territories. One company may break up the city into a dozen distinct territories, each with its own rates, while another company may see London as a single homogeneous region and charge the same amount everywhere. About half of the companies operating in London draw no distinction between neighbourhoods, says Lafreniere.
Of those companies that do divide the city, most see the city in terms of east of Adelaide and west of Adelaide, says Anne Jones of All-Risks Insurance Brokers.
Jones has seen the territorial divisions in insurance rates up close through her 20 years as a broker and by living and raising her family in the east end.
She explains that rates are set by actuaries, people employed by the insurance companies to compile statistics from their company’s history in an area. The more claims filed by people living in a particular territory, the riskier that territory must be, and so the rates go up. Companies don’t share their data. One company’s picture of a particular territory can differ quite a lot from another’s, and so will their rates.
And there’s another problem, says Jones.
“I can’t tell you how many customers I’ve seen deemed as high risks by their insurance company because of things that happened to them.”
Someone who files more than one claim in less than three years starts to look like an undesirable customer even if the claims were for accidents that weren’t their fault.
Jones hates to see her customers punished for bad luck.
“Insurance companies can make mistakes. The stats aren’t always the whole picture, and people need to have someone on their side,” said Jones.
The Financial Services Commission of Ontario is the governmental regulator for insurance companies and other finance-related industries. Before an insurance company can change the rates it charges in even one territory, the FSCO must approve it.
Rate changes are applied for based on the company’s returns. So a company can’t get a rate increase just because it wants one; it needs to back up the request with data.
“Ideally, that data would show an increase in claims,” said Jim Young, a broker with Preferred Insurance Group. Young has 35 years of industry experience. An increase in claims would show that things had changed in that territory and so a change in the rates would be justified.
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| Photo by John Paul Hogan |
| Broker Jim Young says insurance companies are getting more selective about where they want to do business. |
“Often, though, the justification is just that they lost money,” Young said.
Jones explains that if they had to rely on insurance revenue to make a profit, insurance companies would almost always be in the red.
“We see them making millions and millions of dollars over the years and it’s easy to think they’re charging too much, but the truth is they made it in the market,” Jones said.
Young says when the stock markets are good, insurance companies try to get as much new business as possible. They want to insure just about anybody so they can take that revenue and invest it. Most of the money made by insurance companies is made in investment returns, he said.
“That’s what we call a ‘soft market.’ But currently their portfolios suck so they need to make a profit on their underwriting. That means we’re entering a ‘hard market,’ ” Young said.
In a hard market, insurance companies are much more selective about which customers they’ll insure and try to shed themselves of higher-risk business. Young expects to see rate increases for the next few years, and for some neighbourhoods, it’s going to be a lot worse.
“If a company doesn’t want to be in a particular area, their rates will be considerably higher.”
Young said the companies also put pressure on brokers not to write any new policies in that area and may scale back the coverage they offer to existing clients in the hope they’ll leave for another company.
And Young said it always seems to hit harder east of Adelaide.
As for Hunter, she doesn’t see a lot of options. Her rates are higher than she’d like but they’re still the best on offer.
“There doesn’t seem to be much I can do about it right now. But I have wondered, if I lived somewhere else in the city, couldn’t I find a better use for that $49 every month?”
