Auto insurance outlook for Canada in 2023

As we enter 2023 with record-high inflation and face the aftermath of car insurance rebates during the pandemic, it’s safe to say there is change on the horizon for auto insurance premiums across Canada.

Not only do insurance companies have to adjust their premiums for inflation, which eased slightly in December, to 6.3%, they also have to account for the steady influx of drivers on the road since the lifting of public health measures early last year.

Many insurance providers already had their rate changes approved in the latter half of 2022. However, as more rate changes are approved by insurance authorities in Ontario, Alberta, and other provinces, drivers may see a higher premium when renewing their policy.

Each company will always offer a different rate than the next, which is why it’s crucial to compare car insurance rates before renewing your policy. Despite the variance, we can make an educated guess about whether drivers will see higher premiums, when these changes will be felt, and why.

Will auto insurance rates increase in Ontario in 2023?

The short answer — yes. But when will depend on the date your policy is set to renew.

“For current policyholders, rate increases take effect at the time of renewal, so some customers may have already seen their premiums rise, while others may see it in the coming months,” says Tanisha Kishan, RATESDOTCA auto insurance expert. “FSRA is still approving rate increases from insurance providers in 2023 and we can expect an average rise in premiums in the high single digits.”

Ontario auto insurance rates are expected to rise 5% in the first quarter of 2023 and up to 7%-8% in the second. While Q3 and Q4 remain unclear, increases may look similar to that of Q2.

Is Alberta facing car insurance rate increases in 2023?

The outlook for Alberta car insurance rates looks a little different. The province’s rate approvals have been significantly lower, ranging from 2%-3% in 2022, which will impact rates this year. However, the NDP party of Alberta has drafted a bill to freeze car insurance rates for a full year, if elected. In addition, some insurance providers feel pressured to reverse approved rate increases, given the already high rates Albertans face compared to other provinces.

As it stands, Albertans can also expect to pay more for car insurance, but should see far less of an increase than Ontario.

Why are auto insurance rates increasing?

Canada’s inflation rate has remained high for a prolonged period. As a result, insurance providers must adjust their rates to “ensure the values of consumer benefit payments are maintained in relation to inflation,” according to a FSRA news release.

Inflation adjustments can be necessary to maintain the value of certain Accident Benefits like income replacement and medical and rehabilitation. Deductible amounts may also be affected. In short, if claim payouts become more expensive for an insurance company, their premiums and deductibles have to account for that. This, coupled with the need to raise rates after providing insurance rebates during the first couple years of the COVID-19 pandemic, gives companies ample reason to apply for rate changes.

How to save on auto insurance in Canada in 2023

While we’re bound to see the cost of auto insurance rise in Canada this year, individual rate increases aren’t expected to be as large as some of the mortgage payment increases resulting from the Bank of Canada’s hikes. Regardless, it’s still within your power to obtain a lower premium.

Comparing car insurance rates should be your first step. Next, opting for usage-based insurance or pay-as-you-go insurance, which charge you based on how many kilometres and how safely you drive, are both great ways to cut costs if you’re a safe driver and won’t be driving long distances regularly.

According to Kishan, “paying attention to your policy renewal, talking with a broker to ensure you have the right coverage for your vehicle and lifestyle, and shopping around” are three ways to guarantee savings on your car insurance policy in 2023.

“Auto insurance premiums can vary from provider to provider, so comparing premiums is the best way to ensure you're getting the best option for your needs.”

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