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Auto insurance outlook for Canada in 2022

Jan. 31, 2022
5 mins
Cars stuck in traffic

With a new year comes the hope that many Canadians have for a safe and healthy return to a near pre-pandemic lifestyle. As we continue to strive for a “new normal,” our old driving habits are starting to make a comeback. Though the liberty of driving to see our loved ones or to collaborate with coworkers has been a nice step forward since the onset of COVID-19, our increased driving may come at a cost — higher car insurance rates.

Although it’s difficult to predict exact figures, we can speculate whether drivers will see higher premiums, why rates might increase, and at what point in the year we could see these changes unfold.

Will auto insurance rates increase in 2022?

When we consider what’s happened with auto insurance over the last two years, it’s plausible that rates could increase at some point in 2022. In the first quarter of 2021, car insurance premiums decreased substantially, particularly around the Greater Toronto Area. “One of the major reasons that occurred is the pandemic lifestyle,” says Tanisha Kishan, RATESDOTCA expert and chartered insurance professional.

Because there weren’t a vast number of cars on the road, the number of auto collisions and claims declined, which in turn lowered car insurance premiums for many. As COVID-19 restrictions loosened, more Canadians were on the road toward the end of 2021. As we hopefully make our way out of the latest Omicron-fuelled wave, it’s likely this increase in driving will only continue and affect rates accordingly. However, with on and off lockdowns and fluctuating capacity limits, finding consistency in driving patterns can be difficult. “2022 should be interesting because [car insurance rates] will correlate to what occurs with the reopening plan,” Kishan says.

Given the brevity of recent lockdowns and the intent to open businesses back up, there is a chance pre-COVID-19 driving habits will return, along with their rates. “If people switch from working from home back to commuting into the office, and we go back to that pre-pandemic driving state that we were in,” says Kishan, “then I think we’d see our premiums correlate to that.”

Why auto insurance rates will increase eventually

Since provinces seem committed to gradually reopening, it’s unlikely drivers will see car insurance rebates like they did in 2020 and 2021. “The rebates occurred when a lot of people were working from home or might have gotten laid off and were still paying the same amount for insurance,” says Kishan. “I don’t necessarily see the COVID relief measures coming back this year,” but unprecedented times are hard to work with.

According to the Insurance Bureau of Canada (IBC), it’s become more expensive for insurance companies to service auto claims, whether it’s to repair or outright replace a vehicle. “Inflation, labour shortages, increasing levels of technology in vehicles, and global supply disruptions may contribute to increasing claims costs,” says a representative from the IBC communications team. If these factors do play a part in hiking claims costs, they could increase premiums in the process.

Regulation changes are also in effect for select provinces, which will affect auto insurance rates. As of January 1, 2022, Alberta changed its insurance model to Direct Compensation for Property Damage (DCPD), which follows that of Ontario and other provinces. The effects of this change will be uneven, but according to the IBC, approximately 34% of Alberta drivers will see up to a 5% increase in their auto insurance premiums while 42% will see a reduction.

When can we expect auto insurance rates to change in Canada?

Any significant car insurance rate increases we see in 2022 will likely coincide with a broader, stable change in COVID-19 closures and capacity limits.

“If we’re reopening in the middle of the year, consumers might not see that increase right away. It takes a little bit of time for us to look at what happens in terms of claims,” Kishan says. “Rates then have to get filed through our regulator, especially in Ontario.”

For up-to-date rate approvals in 2022, FSRA’s Auto Insurance Rate Approvals database provides official percentage changes for each insurance provider every month, along with their renewal effective date.

How to save on auto insurance in 2022

While we’re bound to see the cost of auto insurance rise in Canada as the pandemic wanes, it’s still within your power to obtain a lower premium. Opting for usage-based insurance, for instance, can be a great way to save. “It’s a way to have more control over what you’re going to pay,” says Kishan. “If you believe you’re a safe driver, you’ve never made a claim, and you should be paying less, then this is the way you do it.”

There's also pay-as-you-go insurance, which charges customers by the kilometre. So, for those who know they won’t be travelling far distances on an annual basis, this model might be a more affordable option.

It’s important to remember there is still a lot of choice when it comes to finding an affordable rate. Comparing auto insurance rates is a sure way to know you’re getting the best rate available to you. And shopping around for car insurance before your 2022 renewal date could be more important than ever this year.

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Michelle Bates

Editor and Writer

Michelle Bates is an editor and writer in the personal finance space. She has seven years of content writing experience.

She has a Bachelor of Arts (Honours) degree from Queen's University in English Literature and Sociology along with a Publishing - Book, Magazine and Electronic graduate certificate from Centennial College. Michelle specializes in personal finance content, including mortgages, home, auto, and travel insurance, and credit cards. Her work has been covered by notable Canadian news sources like the Financial Post, the Globe and Mail, CTV News, and Narcity.

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