Over the last few months, the Financial Services Regulatory Authority of Ontario (FSRA), the provincial body that regulates auto insurance pricing, approved rate increases from several insurance providers across Ontario.
The rate approvals range from as high as 5%, by Pafco Insurance Company (part of Allstate) to as low as 0.03% by CUMIS General Insurance Company (part of Co-op). The highest rate increase the FSRA approved in the second quarter was 10.37% for Zenith Insurance Company.
These approvals signal that inflation may finally be making its way into the world of auto insurance prices.
Inflation is beginning to impact auto insurance rates
Throughout the last two years, auto insurance providers in Ontario were issuing rebates to consumers for driving less as a result of the COVID-19 pandemic. However, those rebates have since ended, as more people are returning to the office and getting back on the roads in general.
In June, inflation hit its highest point in nearly four decades, at 8.1%. Not only are auto parts more expensive, but they’re also harder to come by thanks to ongoing supply chain issues. This results in higher repair costs and repair time delays — all of which spell higher claims costs. In order to recoup some of these losses, insurance companies apply to FSRA to increase their premiums.
What it takes to get approved for a rate increase from the FSRA
Ontario’s auto insurance companies are required to seek approval from FSRA for rate changes, which they may file to account for increased claims costs and other market fluctuations. For instance, as the cost of vehicle parts continues to rise, so do insurance companies’ claims costs. To recoup some of those losses, providers may raise their rates so that they can replenish their cash reserves and continue to pay out claims.
When issuing rate approvals, FSRA will look at an insurance company’s claims obligations, its operating expenses and profit, as well as market conditions. FSRA reviews the requested rate change and ensures that the insurance company’s proposition is fair and reasonable to the consumer. Insurance providers seeking approval for an increase above 5% must undergo a more arduous process.
This year, FSRA notes that several factors, including inflation and more car usage are impacting price changes.
Some insurance companies’ rate changes take effect starting in September, while others won’t take effect until 2023. If your insurance policy is up for renewal, you should be comparing auto insurance rates now to see if you can find a lower price by the time your renewal date arrives.
With auto insurance rates rising, now’s the time to shop the market
While you can’t control how big of an increase your insurance company gets approved for, you do have control of other factors that impact your rate.
To determine your premium, your insurance company considers several things, including your age, gender, postal code, driving history, mileage, and coverage amount. Some of these factors can change from year to year. Maybe you’ve moved, started driving less, or decided to decrease your coverage. The rate that worked for you last year may not be the best one for you this year. A smaller insurance company may be able to offer lower rates to attract new customers, while another may find it has a lower frequency of claim payouts in a given neighbourhood, so it can offer lower rates to those in that postal code.
The reality is: auto insurance rates in Ontario are going up. If you are with an insurance company that got approved for a rate hike, be prepared for a higher rate when your policy renews. While it doesn’t mean that your rate will increase by the same percentage your insurance provider got approved for, you can expect your premium to rise as a result.
Comparing auto insurance rates is one of the easiest ways to regain some control over what you pay for auto insurance. So, if your policy is soon up for renewal, now is the perfect time to shop the market and make sure you’re getting the lowest rate.
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