You will need car insurance if you are a car owner with a licence to drive in Canada or looking to become one. This mandatory expense protects you and your vehicle in case of a collision or other damage. However, you may not know how your insurance rate is being calculated, despite its long-term impact on the cost of car ownership. One such factor is known as CLEAR or Canadian Loss Experience Automobile Rating. It is just one of several factors that help to determine your car insurance rate. Let’s delve deeper into CLEAR and how it affects you as an Ontario car owner.
Factors you can control when it comes to your car insurance rate
While it is true that there are factors beyond your control when it comes to car insurance ratings. Including your age, there are four factors that you can control to assist you in achieving a lower car insurance rate:
- Your driving record. This is the number of accidents, tickets, and other violations you may have.
- Mileage on your vehicle. A.k.a. how much you drive.
- Your credit score. Your financial responsibility.
- The make and model of your vehicle.
Vehicle Make and Model
The vehicle you drive helps inform your insurance provider of your risk as a policyholder. Each vehicle has its own Canadian Loss Experience Automobile Rating, or CLEAR rate, based on its claim probability and claim cost. Certain safety features, for example, may lower your claim risk while also increasing the cost of repair due to their advanced technology. Theft also plays into a vehicle model’s risk rating. If your model has zero loss-prevention features and a high occurrence of being stolen, your rate may be higher. That’s why it’s a good idea to prioritize a secure vehicle while keeping the cost implications of safety features in mind.
What is CLEAR exactly?
The insurance industry evaluates data to help predict how much they made to pay out if your particular vehicle is involved in a claim. The data being used to arrive at their determination includes:
- Your claims frequency
- Claims cost
- The likelihood that your vehicle will be stolen
This data is used by insurers to group vehicles into higher and lower CLEAR rankings. However, CLEAR is just one factor used to determine your auto insurance premium.
How insurance companies rate each private passenger vehicle
The CLEAR system was developed by the “Vehicle Information Centre of Canada” or VICC. The Insurance Bureau of Canada (IBC) defines the system as “an accurate and credible assessment of the expected and actual claims loss experience for each make, model, and year of private passenger vehicle.” Its objective is to predict future claims costs as a tool to provide fairly priced insurance costs for vehicles that experience fewer claims and smaller losses.
Some vehicles that fall outside the CLEAR rating system are significantly modified vehicles and vintage collector vehicles. This is because they are rated based much more heavily on vehicle value.
How does CLEAR work?
It is a numerical rating system that assigns numbers to four coverage categories:
- Direct Compensation for Property Damage (DCPD)
- Accident Benefits
- Collision Coverage
- Comprehensive Coverage
You can find this information in the rating section of your automobile insurance policy. We refer to these numbers as “Rate Groups”. Rate Groups are vehicle-specific for each year, make, and model (including trim packages and upgrades). Rate groups are not postal code specific. Other factors, like the MSRP, performance features, safety features, and parts availability, are. Data collection is from a variety of claims that happen across Canada, and how much they cost. Analyzing this information helps determine average claim costs. As a result, they apply to a specific year, make, and model of vehicle to indicate its performance in comparison to the average.
Insurance companies use internal data to calculate which vehicles are riskier to insure. They’ll use historical statistics from every claim reported to them in the past. So, companies will know which cars get into more accidents, which cost more to repair, and even those that are vandalized/stolen most often. These factors all contribute to your car insurance calculations. Learn more about your car by reading “How Cars Measure Up” by the Insurance Bureau of Canada (IBC).
Low CLEAR ranking
A lower CLEAR ranking indicates a lower claims risk, which can potentially lead to lower insurance rates. For example, insurers may quote a lower premium for a vehicle that costs more but has:
- An Advanced Driver-Assistance System (ADAS)
- Anti-lock brakes
- Dual and side airbags
- Side-impact door reinforcements
- Anti-theft devices
- Winter tires
High CLEAR ranking
A higher CLEAR ranking indicates a higher claims risk and may result in higher auto insurance rates. Insurers may quote a higher premium for a vehicle that is less expensive to buy and features:
- Minimal or basic loss-prevention features
- Lower-than-average or limited safety and accident-prevention equipment
You can also learn about new cost savings offered by Telematics Insurance. By installing a technology device in your car that records your driving activities, insurers can use this information to personalize your auto insurance premium.
On average, most drivers in Ontario pay $1,300 to $1,800 annually for auto insurance premiums. Rates are higher or lower depending on where you live, the type of vehicle you drive, your driving history, and many other factors. The Canadian Loss Experience Automobile Rating system attempts to provide all Canadian drivers with fairly priced insurance premiums. They achieve this by analyzing and predicting future claim costs specific to the year, make, and model of each vehicle. Speak with one of our isure representatives today to take a closer look at what you’re paying and to help you find savings on your car insurance.
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