TORONTO - Ontario's NDP accused auto insurance companies of charging lower-income drivers higher premiums because of the neighbourhoods they live in, but the industry dismissed the claim Tuesday.

New Democrat researchers, using the same driver profile, were quoted car insurance rates ranging from $2,517 in Toronto's low-income Jane-Finch neighbourhood to less than half that, $1,153, if the driver lived in the city's upscale Lawrence Park area.

"It's pretty obvious that it's the neighbourhood that this person lives in that makes the difference in their rates, and not their driving record," said NDP Leader Andrea Horwath.

"There's no fairness. You shouldn't be judged by who your neighbours are. You should be judged by your driving record."

Horwath said premiums for drivers seem highest in poor areas and neighbourhoods with the most new immigrants, but she stopped short of accusing insurance companies of discrimination.

"I'm not going to accuse outright the insurance companies of that kind of behaviour, but I think what this unveils is a real worry about what exactly it is that they're basing their rates on," she said.

"When you look at the way the rates are set, when you look at the neighbourhoods that tend to be targeted for higher rates, it's the neighbourhoods where there's lots of newcomers, where there's a lower income."

The Insurance Bureau of Canada said premiums are approved by a government agency, and are based on the history of claims in the area in addition to a drivers' record and other factors.

"You're looking at experience and claims of drivers, and certainly in districts," said IBC spokesman Steve Key.

"Insurance rates are high everywhere. People should be shopping around and looking for the best rates they can."

Horwath wants a complete overhaul of Ontario's auto insurance system, and said a legislative committee should examine the issue.

However, there won't be any legislative committees until at least late February, because the three political parties couldn't agree on their makeup in the new minority parliament.

"It's really unfortunate that at this point in time that we weren't able to establish committees because it seems to me this is the perfect issue that an all-party committee could look into," said Horwath.

The Progressive Conservatives said they didn't think insurance companies were discriminating, and noted the auditor general concluded insurance fraud is widespread in Ontario and a major cause of driving up rates.

"We know fraud's a problem, so let's start doing something about it," said Opposition critic Jeff Yurek.

"Let's establish some sort of unit in the Crown attorney's office and let them go after it."

Horwath echoed the auditor general's recent concerns about the 12 per cent guaranteed rate of return for Ontario insurance companies, which was last reviewed in 1996 when the long-term bonds against which it was pegged were around 10 per cent.

However, IBC said insurance companies have been losing money on auto insurance in Ontario for at least three years.

"Far from earning profits, insurers lost about $1.7 billion on Ontario auto insurance in 2010," the association said on its website.