Imagine you were looking to purchase a new mobile phone. Would you buy the first device you saw on offer from one retailer at any price without knowing all of all its features or comparing it and its cost to other devices available through other retailers? Chances are you would not. You would likely shop around to see what your options are.
Yet, that same level of consumer diligence is not as common when it comes to purchasing auto insurance. Why? Shopping around enables consumers to ensure they’re getting the best auto insurance price as well as discovering discounts for which they may qualify. The cost of auto insurance policies can vary by hundreds of dollars, depending on which insurer you choose.
According to the results of one survey of American drivers, 36% of adults who own a car don’t compare rates or shop around for car insurance at all. Interestingly, when asked what is top-of-mind when considering which auto policy to buy, 54% of the survey’s respondents say it is the price (their No. 1 priority).
Choosing a policy that fits your budget is sensible. But it shouldn’t be your only consideration. The types of coverage within an auto policy, as well as the insurer’s customer service and claims-handling record, are also important factors to weigh.
A report published by Deloitte Canada suggests evolving consumer behaviours, intensifying competition, and disruptive technologies are prompting changes in the private auto insurance industry. It finds Canadians who compare insurance quotes online jumped from 23% to 40% between 2008 and 2013. Furthermore, the Deloitte study finds:
- 70% of consumers use some form of digital research before buying insurance
- More than 25% bought policies online
- Almost 70% of Canadian consumers are willing to use a mobile app from their insurance provider
- 40% of consumers are likely to switch insurance providers after 12 months
Is Brand Loyalty a Factor When Buying Auto Insurance?
Perhaps it has to do with loyalty discounts. On the topic of brand loyalty, KPMG Canada finds 57% of Canadian consumers expect personalized treatment from a company they are loyal to, 65% highlight customer service as a factor, and 66% say product consistency is essential.
No one wants to lose a valuable discount that helps keep their rates low. But are you saving more with a loyalty discount than you could with another different insurance company whose pricing structure is different? Not necessarily.
How Are Auto Insurance Premiums Calculated?
The Insurance Bureau of Canada (IBC) outlines the risk characteristics auto insurers use to determine an individual’s premium. Those factors include:
- The vehicle you drive
- Your driving record
- Where you live
- You age, gender, and marital status
- The number of kilometres you drive annually
Other factors that affect your rate include:
- The amount of coverage you purchase. In Ontario and Alberta, you have the option to go beyond the minimum mandatory auto coverage you are legally required to buy. In Alberta, mandatory auto coverage includes a minimum of $200,000 third-party liability and accident benefits. In Ontario, mandatory auto coverage consists of a minimum of $200,000 third-party liability, direct compensation-property damage, uninsured auto, and accident benefits. In both provinces, you can up the amount of the minimums, and add optional coverages like comprehensive, collision, and specified perils or all-perils to your policy. Other types of optional coverages or endorsements include car rental insurance, a waiver of depreciation (for new vehicles), and income replacement benefits.
- The deductibles you choose. A deductible is an amount of money you must pay if you file a claim on an at-fault loss before your insurance provider pays out. Insurers typically offer different deductibles for separate coverages. Choosing the right deductible is an important consideration.
- Which insurer you select to buy a policy. Like all companies in any industry, auto insurers compete with each other for your business. That’s why auto premiums can vary substantially. Comparing policies and rates is the best way to discover what your options are before making a purchase.
When Is the Best Time to Shop Around for a Low Car Insurance Rate?
Car insurance rates often change. In Ontario, for example, the Financial Services Regulatory Authority (FSRA) typically publishes the rate changes for private auto insurers it approves every three months. Similarly, Alberta’s provincial regulator, the Automobile Insurance Rate Board (AIRB), publishes details on the filing decisions it approves for the auto insurers that provide private passenger vehicle insurance in that province every quarter. (Note: both FSRA and AIRB did not announce rate changes in the first quarter of 2020 because of the COVID-19 pandemic.)
Sometimes just a few insurers change their rates, and other times dozens do, which is why you should compare auto rates regularly. Shop your rate when:
- When your policy is up for renewal
- If you get married or divorced
- If you move to a different neighbourhood or municipality
- Buying a new vehicle
- Adding drivers to your policy such as one of your adult children
- Your driving record changes (for the better or worse)
- You change jobs or retire (thus changing your daily commute)
- You’re eligible for a group rate (group rates may be available for alumni and students of specific schools, an employer, union, or as part of a particular profession)
Compare your auto insurance rates in less time than what you may spend researching which new mobile phone to buy. You may be pleasantly surprised to learn you can save funds while still getting the tailored protection you and your family needs.