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Auto Rates Keep Going Up in Canada, But Why?

May 16, 2019
3 mins
A couple relaxes together on the couch while looking at their tablet

If your auto insurance bill has gone up recently, you are not alone.

It has been widely reported that auto rates have been steadily increasing across Canada in the last couple of years. The sharp rise in premiums has left many Canadian drivers, especially those with spotless driving records, scratching their heads. The governments of many provinces are now getting involved, including Ontario where the Ford administration has unveiled an ambitious plan to overhaul the industry and lower rates for consumers.

The fact of the matter is rising premiums are primarily related to increasing numbers of claims, with some provinces experiencing more claims than others. The growth in claims has increased costs for insurers, who in turn must increase rates to remain in business. According to the Insurance Bureau of Canada for example, auto insurers paid out $1.02 in claims for every dollar they received from premiums in 2017.

So what is causing the total amount of auto insurance claims to increase across Canada? There are a few big reasons.

Distracted Driving

Smartphones and other devices have revolutionized the world, but they have also made driving more dangerous. Canada has been far from immune from the effects of distracted driving with officials and insurers alike naming it as a major cause for the growing number of high-cost collisions taking place on roadways each day.

Repairs Are More Expensive

Not only are there more claims than ever, but the average amount of each claim is also going up, further increasing costs for insurers. The reason? Modern vehicles are equipped with more technological components than ever and replacing them after a collision is pricey.

Floods, Storms, and Hail

Weather-related claims, particularly in Alberta, have been on the rise for the last few years. The increase in storm-related damage from both flooding and hail has become an area of growing concern for insurers. Climatologists attribute the increased frequency of severe storms to climate change. These weather-driven claims are expected to be a source of ongoing pain for drivers and insurers alike for some time to come.

Legal Costs

Litigation around bodily injury claims has increased, particularly in Newfoundland and Labrador where there is a lack of limits on damages that can be pursued by attorneys. In fact, a growing portion of insurance payouts is now going towards legal fees. Some also point to growing instances of fraud as a factor for inflating the cost of claims, with various parties looking to take advantage of the system.

Less Competition

In an attempt to help bring costs down, a cap on insurance premium increases in Alberta was blamed for some insurers' decisions to pull out of the province. That, in turn, led to less competition in the region and with less competition come higher rates overall.

While these factors have combined to raise the premiums of Canadian drivers on average, many are likely to find better rates on their auto insurance if they were to shop around and consider a new provider.

Check out rates.ca to see if you can save money today.

RATESDOTCA Team

The RATESDOTCA editorial team are experienced writers focused on sharing stories and bringing you the latest news in insurance and personal finance. Our goal is to provide Canadians with the information and resources they need to make better insurance and financial decisions.

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