Auto insurance outlook for 2024

At the risk of sounding like a broken record, 2023 wasn’t the year that we were all hoping for – the high costs of living have squashed a desire to splurge or squeezed the willpower to save for many. While inflation is predicted to ease in the latter part of 2024, and eventually return to the targeted 2% in 2025, it will likely take some time for the Canadian economy to cool.

On the auto insurance front, car insurance premiums across Canada saw a nearly 6% increase in insurance premiums from December 2022 to 2023. To keep up with inflation and market conditions, the Financial Services Regulatory Authority of Canada approved rate increases for auto insurance companies, which will be in effect this year.

As we head into 2024, elevated inflation and rate increases will only mean higher premiums for customers.

The good news is that stakes are higher and subsequently, there’s increased pressure to make auto insurance more affordable. Government and regulatory bodies, for instance, are working with insurers to implement legislative reforms in Alberta and Ontario. Car manufacturers and insurance companies are working with law enforcement bodies to identify solutions to prevent auto theft.

Let’s take a closer look at what 2024 holds for the auto insurance industry.

Provincial legislations

Alberta and Ontario have introduced auto insurance legislations that will be in effect this month.

Alberta

Alberta – known for having the highest car insurance rates and highest claim frequencies across the country – has introduced a plan to cap rates at 3.7% for good drivers. The cap follows the inflation rate and restricts any further premium increases. The cap follows the Alberta rate freeze implemented at the beginning of 2023.

Some critics of a rate cap say that it might lead insurance players to opt out of the market. Over $100 million was paid out in insurance damages to repair and replace vehicles after the floods and hailstorms of last year. Paying out high claims (particularly, as we continue to see extreme weather) while capping rates may lead to fewer insurance players in the Alberta market and fewer options for customers.

Lorraine Sommerfeld, Driving.ca’s columnist, also predicts that Albertans may resort to settling non-injury claims on their own to prevent a bad record.

In late January, both the Canadian Federation of Independent Business (CFIB) and the Insurance Bureau of Canada (IBC) called for the provincial government to eliminate the additional 4% tax (translating to about $100) on annual driver insurance policies.

Ontario

Where Direct Compensation - Property Damage (DCPD) was previously mandatory, Ontarians can now opt out of this coverage, thereby reducing their premiums.

Opting out of this coverage means that drivers who get involved in a not-at-fault collision will no longer be reimbursed for vehicle repairs, loss of a vehicle or its contents, or a replacement vehicle.

And while it might be tempting to forgo coverage to save a few bucks, it may not be in your best interest. Not only does DCPD offer protection against property damage, but it also ensures a swift fault-determination process.

Auto theft

The prevalence and severity of auto theft has escalated it to a “national crisis.”

As we head into 2024, organized auto-theft hasn’t slowed down, but rather, worsened. And all parties (the government, law enforcement, and insurers) are taking an integrated approach to combating it. The Ontario government recently announced $18 million in additional funding to help police services prevent auto-theft, on top of the $51 million they pledged in May of 2023.

As a result of the increase in thefts, comprehensive insurance premiums for commonly stolen vehicles have increased between 25% to 50% over the past two years. Furthermore, the Insurance Bureau of Canada estimates that Ontarians are paying more than $1.9 billion to cover the costs of auto theft, with an insured customer paying an average of $130 per year on law enforcement associated with auto theft.

To reduce claims cost, insurance companies introduced a $500 surcharge on high-risk vehicles. Customers can get this surcharge removed if they’ve installed an anti-theft device on their vehicle, whether that be a Tag anti-theft system or a wheel lock.

Related: Installing an anti-theft device can save you from an insurance surcharge

Not only does installing an anti-theft device safeguard your car and save you from a hefty surcharge, but it can also help save on your insurance premiums. Some insurance companies have partnered with Tag and offer a 20% discount on comprehensive coverage for vehicles that have Tag installed on their cars. However, as more customers receive the notice to get a Tag system, more questions may be asked about why there aren’t other options.

Vehicle part shortage and repair delays

Auto insurance premiums will continue to be affected by supply chain disruptions, high costs of repair and maintenance, and more complex repairs required for newer car models.

Supply chain disruptions

The automobile industry has been seeing unprecedented vehicle part shortages and repair delays. And as inflation and geopolitical conditions continue to be volatile, so will supply chain disruptions. One such example is Tesla’s announcement that it will be halting production in response to risks over the Red Sea shipping route, and Volvo cautioning against a delay in the delivery of gearboxes.

Complex repairs

Vehicle repairs on newer and more advanced car models are complex and require specialized technicians (and thus, higher labour costs). Take, for example, advanced driver assistance systems (ADAS) like automatic parking systems that come equipped with front or rear ultrasonic sensors.

In a collision, the costs to repair a bumper with sensors would set you back by $1,000, whereas getting a regular bumper repaired can cost as little as $150. ADAS may mean more safety features, but on the flip side, you’ll be forking out more for repairs that would’ve otherwise been a minor expense.

Another example is that of electric vehicles (EVs) – as they require original equipment manufacturer parts, they cost more to repair. The current shortage of trained technicians could also leave EV owners with higher repair bills and long wait times.

Related: Electric vehicle repair: what are your options?

Lengthy repair time

Complex repairs and an ongoing supply shortage also means long wait times on vehicle repairs. As a result of a collision repair backlog, customers increasingly rely on rental vehicles for their transportation needs. An Enterprise report highlights that the average length of a rental for collisions in 2023 was 16.3 days, a slight decrease of 0.2 days from the previous year.

What goes up, must come down

Insurance premiums are affected by the increase in price of goods, services, and labour. If inflation eases this year, it will help insurers recoup some of their physical damage losses (that is, damage to the car and costs to repair it).

While we’re banking on inflation easing, our best bet in the meantime is to compare auto insurance rates offered by different insurance companies to make sure you are getting the lowest rate for your coverage requirements.