Why Ontario Manufacturers Delivering Goods to the United States Require Higher-Cost Motor Vehicle Insurance

Despite current relations between Canada and the United States and the related tariff strife, Ontario manufacturers do continue to ship goods state-side. As a result, there continues to be, albeit somewhat less frequently than in years past, inquiries made by manufacturing clients looking to reduce their cost of doing business. Often, it is the notion of reducing shipping costs by doing their deliveries opposed to using common carriers. In general terms, the cost of doing one’s own cross-border shipping remains more expensive than the use of common carriers, and here is why.

For manufacturers in Ontario, transportation is a critical component of their operations. Whether goods are moved a short distance within the province or across international borders, manufacturers depend on motor vehicle fleets to ensure that their products reach customers efficiently and reliably. However, when Ontario-based manufacturers choose to deliver goods directly into the United States, they encounter significantly higher insurance costs than their peers who restrict deliveries to domestic routes within Ontario or across Canada. This disparity is not arbitrary; it reflects the increased risks, regulatory complexities, and financial exposures that insurers must account for when underwriting policies that extend into U.S. jurisdictions.

1. Cross-Border Liability Exposures

One of the primary reasons U.S.-bound deliveries attract higher premiums is the difference in liability exposure. In Canada, liability limits and claims handling practices are relatively predictable, with provincial regulations standardizing the minimum insurance requirements and claims settlement framework. In the United States, however, liability lawsuits often result in higher settlements or jury awards, especially in cases involving commercial motor vehicles.

Ontario manufacturers entering the U.S. expose themselves to the risk of multi-million-dollar liability claims in the event of accidents, particularly in states with reputations for “nuclear verdicts”—jury awards that exceed what would be considered reasonable under Canadian standards. U.S. courts are more likely to award punitive damages, which are not a factor in Canada, and insurers must price policies to reflect this possibility. Consequently, insurers charge higher premiums to account for this elevated liability environment.

2. Differing Legal and Regulatory Requirements

Operating vehicles in the United States means complying with the Federal Motor Carrier Safety Administration (FMCSA) regulations and various state-level requirements, which add complexity and risk. Ontario-based fleets must carry higher minimum liability limits to operate legally in the U.S., often exceeding the Canadian statutory requirements. For instance, while $1 million in liability coverage may be sufficient for domestic commercial use in Ontario, U.S. regulators may demand $5 million for certain cargo types, such as hazardous materials.

In addition, cross-border operators are subject to extensive compliance rules, including hours-of-service regulations, electronic logging devices (ELDs), drug and alcohol testing standards, and driver qualification files. Failure to comply not only increases the risk of fines and penalties but also heightens liability exposure if non-compliance is linked to an accident. Insurers recognize these added compliance burdens and reflect them in higher premium costs.

3. Increased Frequency and Severity of Claims

Driving in the United States typically involves longer trips, higher traffic density, and exposure to unfamiliar road networks. Ontario manufacturers who deliver to U.S. destinations face greater mileage exposure, which naturally increases the statistical likelihood of accidents. Furthermore, accidents in the U.S. are often more severe from a cost perspective. Emergency response, towing, medical expenses, and property damage claims are significantly more expensive in the U.S. than in Ontario.

Insurers use historical claims data to set rates, and experience shows that fleets operating in the U.S. generate more frequent and costlier claims. Even minor collisions can escalate into expensive claims once medical bills, litigation costs, and cross-border legal coordination are factored in. This higher severity of claims drives the need for higher insurance premiums.

4. Cargo and Security Risks

Another factor influencing insurance pricing is the nature of the cargo and the risks associated with transporting goods into the United States. U.S.-bound shipments may be more attractive targets for theft, especially when vehicles are parked overnight near border crossings or rest stops along major interstate highways. In addition, cross-border cargo is more likely to include higher-value products such as electronics, auto parts, or machinery, which carry elevated risks of financial loss if damaged or stolen.

Insurers also consider the additional risks associated with customs clearance delays, potential exposure to smuggling or contraband liabilities, and even terrorism-related risks in cross-border freight operations. These considerations add layers of complexity and increase insurance costs relative to domestic-only deliveries.

5. Administrative and Legal Costs for Insurers

When underwriting policies that extend into the United States, insurers must anticipate higher administrative and legal costs. Claims involving cross-border incidents are more complex to handle, requiring coordination between Canadian insurers, U.S. adjusters, and often legal counsel in both jurisdictions. The increased cost of handling such claims is built into the pricing of cross-border motor vehicle insurance.

Even without a claim, insurers face greater administrative expenses in ensuring compliance with U.S. filings, such as the MCS-90 endorsement, which guarantees financial responsibility for motor carriers operating in the United States. These requirements add overhead that does not exist for domestic-only operations, further contributing to premium differences.

6. Exchange Rate and Financial Considerations

Finally, currency exchange risk also plays a role. Since claims paid in the United States are settled in U.S. dollars, Canadian insurers must account for potential fluctuations in exchange rates that can significantly increase the cost of settlements. A liability award of $1 million USD, for instance, could represent a much higher financial burden in Canadian dollars depending on the prevailing exchange rate. This volatility adds financial uncertainty, which insurers mitigate by charging higher premiums for U.S.-bound coverage.

Conclusion

Ontario-based manufacturers who choose to deliver goods into the United States face a fundamentally different risk environment than those who restrict deliveries to Ontario or other Canadian provinces. The elevated liability exposures, stricter regulatory requirements, increased frequency and severity of claims, cargo and security risks, higher administrative costs, and exchange rate uncertainties all combine to create a significantly more complex and costly insurance profile.

As a result, motor vehicle insurance premiums for U.S.-bound deliveries are inevitably higher. While this represents a substantial cost of doing business, it also underscores the importance of comprehensive risk management. Manufacturers must weigh the benefits of accessing U.S. markets directly against the added costs and risks of cross-border transportation. For those prepared to manage the challenges, higher insurance premiums are not just an expense—they are an essential safeguard in navigating the complex realities of international commerce.