Auto insurance premiums have increased over the past two years — and the brakes aren’t about to slam on those rates just yet. Average rates in Ontario cities have jumped by as much as 37 per cent since 2021 due to short supply, an uptick in car theft and surging inflation, according to a report from Ratesdotca.
While the rate hikes estimated in the report seem high, they aren’t that surprising, said Daniel Ivans, an expert with the Toronto-based insurance agency.
“We’ve been seeing some pretty significant rate increases across the board,” Ivans said, referencing similar surges in Western Europe, the U.K. and the U.S. “Ontario has been a little bit behind over the last year and a half, and they’re just catching up now.”
Early in the pandemic, Ivans said rates went down due to fewer cars on the road. But as people return to their commutes, insurance companies are increasing their prices to hedge their financial position. “Rapidly rising inflation” and the technological advancement of cars add an extra crunch via higher costs of labour and repairs, Ivans said.
Brampton takes the crown this year, with Ontario’s most expensive average premium of $2,707, up nearly 40 per cent from $1,976 in 2021. Ivans said this is because Brampton is “very much a driving city” — 76 per cent of city residents drive to work, according to the 2016 census. What’s more, drivers in Brampton commonly file accident claims that tend to be the most expensive kind, with payouts that can amount to tens of thousands of dollars, according to the report.
Toronto takes second place on the list, with an average premium of $2,325, amounting to an increase of 19 per cent over two years. As a whole, average car insurance rates in the province rose by 12 per cent since 2021.
From the beginning of the year to now, the Financial Services Regulatory Authority of Ontario (FSRA), has approved 33 rate changes requested by insurance companies, including decreases, increases and neutral (no change). FSRA spokesperson Russ Courtney said this is on pace for about 20 changes per quarter, the same as last year.
“Market conditions are impacting the cost of auto insurance” said Courtney, clarifying that rate changes may not impact all customers. “Generally, current auto insurance rates are in line with 2019 rates after consumers in Ontario saw significant decreases during the pandemic.”
He added that auto insurance quotes can vary widely among insurers. “We encourage all consumers to shop around to get the best price for their auto insurance.”
Ivans said the rate increases to date don’t necessarily cover the extent of losses insurance companies have experienced over the past few years. He assumes rates will continue to creep upwards for the foreseeable future. “There’s some fine tuning to come,” he said in the report.
That said, the data collected by Ratesdotca is based on sample quotes for a 35-year-old male driver of a sedan, with no claims or driving convictions. The report clarifies that factors such as your age or the type of vehicle you drive can have an affect on the cost.
In an emailed statement, the Insurance Bureau of Canada (IBC) said it can’t speak to the accuracy of Ratesdotca figures. The report doesn’t utilize data from the General Insurance Statistical Agency (GISA), which provides statistics about auto insurance premiums and claims in Ontario and across Canada, it said.
IBC pointed out a “notable difference between ‘quotes generated’ and ‘premiums paid,” and said outlier quotes could skew averages to make rates appear significantly higher or lower. According to the most recent data available from GISA, the average premium paid (not quoted) in Ontario this March was $1,767, up 6.7 per cent from the previous year.
“The average of several quotes does not necessarily reflect the actual premiums paid,” said Anne Marie Thomas, IBC’s director of consumer and industry relations. “Drivers often select the most affordable quote, not the average.”
Thomas agreed however, that auto insurance within the province is expensive and said IBC is ready to work with the provincial government and stakeholders interested in addressing affordability for drivers. She highlighted increasing criminal activity and fraud as having an impact on overall claims costs for drivers.
“Insurers are not immune to these challenges, and must adapt in order to continue to meet obligations to policyholders,” Thomas said.
Non-GTA cities included in the report remain below the provincial average. Increases in cities like Ottawa have been “mild to date” due to their smaller population and lesser density.
Ivans said around 70 per cent of consumers in Canada don’t shop around for insurance on an annual basis. He expects these rate hikes to change that. “Consumers will be a lot more motivated to get out there and see what their options are.”
Other cost-saving strategies highlighted in the report include usage-based insurance and telematics, which track individual driving habits in exchange for discounts. “Bundling” is another strategy and involves insuring your home or any of your other vehicles with the same company, for savings up to 40 per cent in some cases.
One thing consumers shouldn’t do to save money on auto insurance is cut their coverage, Ivans said, as it can come back to bite you.
“They might find themselves exposed and without the funds required to replace or repair their vehicle.”
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