Persistent inflation, higher repair costs, a growing number of auto thefts and more severe weather events are leading to higher car insurance premiums across Canada.
Auto insurance premiums increased 12 per cent across the country in the third quarter compared with the same period last year, according to the latest Applied Ratings Index, a data-driven report on current conditions for personal auto and property insurance rates. The biggest jumps were in Alberta and Ontario, with increases of nearly 13 and 12 per cent, respectively.
“We’re seeing increases in trend lines nationally as well as provincially. Even in provinces where the year-over-year increase is less than others, we’re still seeing an increase, whether it’s inflation, cost of repairs – all those things are feeding into those trends,” said Steve Whitelaw, senior vice-president and general manager at Applied Systems Canada, the insurance software company that publishes the data.
Inflation is a major contributor to auto insurance premiums. “Inflation impacts everyone across the country, including the insurance companies for claims,” said Rob de Pruis, national director, consumer and industry relations at the Insurance Bureau of Canada. Vehicle repairs, labour rates and the cost of injury claims for paramedical services such as physiotherapy and chiropractic visits are going up every year, he said.
Vehicle theft is also putting pressure on premiums. “Back in 2018, we were seeing $500-million paid out on average annually by the insurance industry across Canada for vehicle thefts. This rose to $1.5-billion in 2023,” said Daniel Ivans, an insurance broker with Ratesdotca, an online insurance marketplace. Recent government measures to combat auto theft seem to be working. In Ontario, vehicle theft has dropped by 16 per cent so far this year. “There have been a lot of measures taken especially at the governmental level to battle this,” said Ivans, citing increased police resources devoted to the problem, especially in the Greater Toronto Area. “But they’re still much higher than they were back in 2018.”
According to the IBC, auto theft claims costs, or the amount an insurance company pays out, increased by 254 per cent across the country in the five-year period between 2018 and 2023. In Ontario, auto theft claims costs skyrocketed by 524 per cent over the same period, surpassing $1-billion for the first time in 2023.
Then there’s the increase in severe weather events owing to climate change. “Back in 2018, we were seeing the insurance industry paying out $500-million … for things like forest fires, floods and hail. We’re now at a point where it’s exceeding $3-billion a year,” said Ivans.
That number keeps rising. “This past summer, there were four major events that happened across the country causing over $8-billion in total damages and some of that cost is the vehicles,” said de Pruis. British Columbia had wildfires, Ontario and Quebec saw major flooding and Calgary faced a devastating hail storm that resulted in 70,000 insurance claims for automobiles alone, de Pruis said.
There are too many variables to forecast what will happen to insurance premiums in 2025. “It’s hard to say what the trend line is going to look like in a year because what is going to ultimately determine premiums is going to be how much is being paid out on claims. While we’re seeing a slight decrease in, for example, theft claims, we’re seeing an increase in weather claims,” Ivans said.
Every province and territory has its own rate regulator that approves changes to auto insurance rates. In Ontario, the Financial Services Regulatory Authority of Ontario, or FSRA, has in 2024 given the green light to more than 30 insurance providers for rate increases; some are hefty and coming in the new year. That doesn’t bode well for some customers, especially those in the Greater Toronto Area, who pay an average annual premium of $2,391.
“FSRA does not comment on individual rate applications,” said Russ Courtney, senior manager of media relations at the FSRA. “Speaking generally, and not about any specific application, an insurance company’s proposed rate change is based on its projection of future claims.”
Some provinces, such as Alberta, have rate caps to help stabilize premiums, but that’s creating other challenges. “About 60 per cent of auto insurers in Alberta are losing money – they aren’t profitable. So some companies have made the specific decision to pull out of Alberta and are no longer offering auto insurance because it’s not profitable and not economically viable for them,” said de Pruis.
For consumers, experts say there are ways to minimize the effect of rising premiums: Do your homework and shop around. “Auto insurance is standardized in every province and territory, meaning every organization has to sell the exact same auto product, but there are differences in prices, claim services and a variety of other things,” said de Pruis.
Driving safely – having no at-fault collisions or traffic convictions for speeding, dangerous driving or impaired driving – is the single biggest factor in ensuring your premiums remain stable and the lowest they can be, de Pruis said.
You can also increase the deductible on your policy or drop collision coverage on older vehicles. If you have an older vehicle that’s worth $1,000 and your policy has a $1,000 deductible, for instance, it’s unlikely you’ll see any significant payout in the event of an accident, so you might want to consider dropping that coverage. If you don’t drive much, you could also consider usage-based insurance options, which are determined by how much you drive or where you drive, de Pruis suggests.
He also recommends reviewing your auto insurance annually to ensure you’re getting the right coverage for the best price. “There’s almost 200 different auto insurance companies across Canada that are offering some type of home, auto or business insurance. All of these insurance companies are competitors, so they’re competing with each other to get your business, said de Pruis.
As for deciding to go with another insurer, there’s no need to worry you’ll be punished for it.
“Switching insurance providers does not have a negative impact on premiums. That’s a myth,” said Ivans. “When insurance companies are determining what your premiums are, the vast majority don’t give any consideration to how often you’ve moved, how many insurance companies you’ve been with – there’s no impact. Consumers who are afraid to switch insurance companies because they think it might impact their premiums, across the market that’s just not the case.”
