Ever look at your insurance premiums and feel that prices are always on the rise? Well, you aren’t wrong. The cost of auto insurance premiums has increased exponentially over the past few years. Ontario isn’t alone, either. This is the case no matter where you live in the country. The issue of rising auto insurance premiums is also becoming an apparent issue in the United States. The rise of insurance premiums is expected to continue throughout 2024, according to a Ratesdotca insurance expert. So, why have car insurance premiums increased? What can be done to counter such high insurance rates? Luckily, isure has everything you need to know.

Why have my auto insurance premiums increased?

Unfortunately, there isn’t one exact reason as to why insurance premiums have increased as of late. If this was the case, it would be a much easier problem to solve. Let’s take a look at some of the five most common factors that result in higher auto insurance premiums.

1. Auto theft continuing to rise in Canada

It is no surprise that the auto theft crisis is hitting Canada hard. New data released by the Insurance Bureau of Canada shows that in 2023, the cost of insurance claims hit a record-breaking $1.5 billion. This is an increase of 254% since 2018! On top of this, the province of Ontario seems to be getting hit the hardest, where theft claim costs increased by 524% between 2018 and 2023, surpassing $1 billion for the first time last year. Toronto, the capital of the province, was hit the most, with an increase of 561% since 2018. Overall, this means that between 2018 and 2021, the total amount of auto theft claims across the country totaled an astonishing $556 million per year.

As you can imagine, this is a large reason why car insurance premiums have increased. The cost of claims impacts your premiums because insurers base their pricing on the level of risk associated with a vehicle. If a vehicle has a higher risk of theft, or if your area is a high-theft neighborhood, it will be more expensive to insure. On average, the IBC estimates that auto thefts add approximately $130 to the average annual premium in Ontario.

2. Inflation and car insurance premiums

So far this year, inflation in Canada has decreased exponentially. However, that doesn’t mean it isn’t still an ongoing issue. When it comes to the costs that directly impact auto insurance claims, it is a whole different story. The measure of the average change over time regarding prices paid for consumer goods is called the Consumer Price Index. June of 2022 shows the height of the country’s inflation crisis, when it rose to 8.1% With this in mind, Statistics Canada shows that insurers were seeing a rise in their claims higher than the peak inflation rate.

To put this into perspective, the cost of new vehicles increased by 12.1%, and the cost of parts increased by 18% in the last three years. To this day, suppliers, repair centres, and dealerships continue to face supply chain challenges and a shortage of technicians. Though the situation has improved, these challenges continue to contribute to the rising cost of damage claims.

3. Legal costs and your car insurance premiums

In Alberta, Ontario, and all of the Atlantic provinces, private insurance systems operate under a set amount of rules. These give someone in an accident the right to sue the at-fault driver. Due to this, insurers must take into account the anticipated costs of these potential lawsuits when pricing insurance premiums. In most cases, injured people have to engage with a lawyer after a collision. On top of this, most people injured in a collision make claims and receive benefits during their recovery process.

Many personal injury lawyers use aggressive marketing and advertising tactics to encourage frivolous claims. This drives up the cost for everyone involved, and results in legal costs that exceed the amount provided in a cash payment to those injured in collisions.

4. Regulatory intervention

Something that not many people know is that provincial governments determine the content of auto insurance policies. Furthermore, they’re also in charge of how claims are handled and how complaints are acted upon. In the auto insurance industry, this regulatory intervention can have dire consequences for consumers.

In Alberta particularly, several government rate interventions that began in 2016 created pressures in the insurance system. These made the overall market unattractive for some insurers. In 2023, a total of 17 insurance companies lost money and one left the market. Due to this, some insurers have now reduced the number of different policies they sell, as well as tightened their policy conditions. All in all, regulatory intervention tackles issues within the auto insurance industry down the road, but consumers end up paying the cost.

5. As cars evolve, so do your car insurance premiums

We’ve seen massive advancements in recent years when it comes to cars. From electric vehicles and automation to countless amounts of safety features. However, insurance premiums can be affected by this. As technology advances, repairs become more expensive and increase the cost of claims. Due to this, insurance providers may have to raise rates to meet the higher cost of fixing any vehicles that are damaged in a collision.

An example is a 2017 Toyota Rav 4 rear bumper requires 17 different parts. This adds up to an average total cost of $2,769 to repair. The 2022 model of the same car consists of 17 different parts and costs an average of $4,144 to repair. This means that in five years, the price to fix the bumper of a RAV4 will increase by 50%, or double.

What can be done to lower your car insurance premiums?

At isure, we understand the rising cost of insurance premiums can be daunting. However, there are multiple steps you can take to lower your insurance premium via different auto insurance discounts. On top of this, actions, such as increasing your deductible or bundling policies, can help lower the cost of your premiums.

Most importantly, make sure to do your research and shop around when searching for a new provider, or have an isure broker do so for you. Insurance brokers can give you helpful insight as to why car insurance premiums have increased. Contact us or request a car insurance quote today!

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