News & Resources

Climate Change: How Weather-Related Incidents Impact Insurance Rates

Feb. 11, 19
5 mins
A man working from home sits on his laptop at his kitchen island

Weather and climate change have a significant impact on insurance providers. The industry has an obvious financial stake when it comes to predicting the probability of catastrophic weather. If the climate is unpredictable, it may affect the way that insurance providers calculate risk. What's more, it makes first time car insurance more complicated as there is a lot to consider when coming up with a car insurance quote.

Weather-Related Losses Aren’t Necessarily Catastrophic Losses

The past two years have not been great for the Canadian insurance industry as the number of weather-related losses has increased. Though not always catastrophic, some incidences such as heavy rainstorms tend to cause great losses. On August 7th, Toronto experienced 72 mm of rainfall with 51 mm falling in one hour. The event led to insured damage of more than $80 million. The storm on August 17th also poured in large amount for short periods. It rained a total of 14.6 mm according to Environmental Canada. Fortunately, the downpour wasn’t strong enough to cause much damage to cars.

From an insurance perspective, the heavy rains that hit Toronto in September were a non-event. The car insurance claims were isolated and almost insignificant. According to the Environmental Canada report, it was a total of 26.2 mm. Conversely, the wind and rain storm in Hamilton and the Greater Hamilton Area in May was one of the most expensive weather events, causing over $500 million in damage.

When Events are Catastrophic, They are Becoming Harder to Predict

The wildfire in Northern Alberta that started on May 1, 2016 caused 80,000 people to leave their homes. It destroyed over 2,400 buildings in Fort McMurray. It burned approximately 6,000 square kilometres and caused almost $3.8 billion in insured damage. Thousands were forced to leave their cars behind. Hundreds left their cars along Highway 63. Others abandoned their cars on Highway 881. The province promised to help residents to get their vehicles safely. However, there was no guarantee that the retrieved cars would start.

"After the Canadian wildfire, Aviva’s changes to its risk models filtered into its home-insurance premiums in Canada, which increased by roughly six per cent since 2016, partly because of its research into catastrophe risks," says Arch spokesman Donald Watson.

Unfortunately, with the increasing rate of climate change and unpredictable catastrophic events, historical records are no longer reliable as a tool for predicting weather risks. Insurance providers need extra information to provide their clients with first time car insurance.

Weather-related insurance losses are increasing considerably faster than premiums. If the trend is consistent, changes in the climate will lead to an increase in insurance claims and costs. Insurance companies will have no choice but to increase premiums and deductibles, causing providers to expand their coverage restrictions.

Regardless of weather conditions, compare rates online at rates.ca to find the best auto insurance provider for your needs. Get in touch to find out more about weather-related losses and catastrophic events.

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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