If you are due to renew your car insurance soon, be prepared for a possible rate increase on your renewal notice.
More than two dozen private insurers in Ontario have received approval from the provincial regulator to raise premiums over the next few months, and industry experts say the trend is likely to continue.
“I wish I had good news for consumers, but all I hear is that rates are going up,” said John Shmuel, editor of insurance and finance website Ratesdotca.
“I really don’t know if many insurance companies will be able to keep their car insurance rates flat right now.”
Coupled with the highest inflation rates in decades, higher car insurance premiums would be another blow to the wallets of Ontario consumers. But the good news is that there are ways to lower what you pay.
Brake driving in case of a pandemic
Over the past two and a half years, auto insurance companies have handled fewer claims compared to the pre-pandemic period. Closures and the shift to home working have resulted in fewer drivers on the roads and fewer accidents. Companies responded by lowering prices and keeping them unchanged. Some even offered discounts to customers.
The Financial Services Regulatory Authority of Ontario (FSRA), which oversees the auto insurance market and is responsible for evaluating and approving any rate hikes, has approved no rate hikes in 2020. and only one in 2021 – at 0.29%. But this year, the FSRA has approved 31 rate increases, according to a public database on its website.
Companies are looking to raise prices now because their costs are rising as interest rates return to normal, Shmuel said.
“Anywhere you look in the system, there’s just more cost,” he said.
Inflation increases the price of new, used and leased cars and car parts. Ongoing supply chain issues make it difficult to get parts on time.
Some of the reasons for the rising costs for insurers predate the pandemic, Shmuel said, such as how increasingly complex car designs have made them harder to repair.
A recent increase in car thefts in the Greater Toronto Area could also put upward pressure on prices as insurers pay more to replace stolen vehicles, Shmuel said.
Mary Kelly, professor of finance at Wilfrid Laurier University in Waterloo, Ont., said the cost of providing health care to accident victims, such as rehabilitation and disability benefits, is another factor driving up costs for insurers.
“We know that medical costs are always rising [so if] the likelihood of you having an accident is higher because we’re back to pre-pandemic levels, so those costs are going to go up as well,” Kelly said.
Kelly said whether or not your rates go up depends on which company you buy your insurance from, where you live and other features that affect your premium, such as your claims history and the type of vehicle you drive.
Ways to lower your prices
Experts say there are a number of things you can do to ease the pain of rising insurance rates.
Shop around and compare prices. Unlike other provinces in Canada that only have one public insurance company, Ontario has dozens of companies that offer auto insurance. This allows you to compare plans and prices. Talk to an insurance broker or check a price comparison website to find a price that’s right for you. Kelly recommended young drivers look for packages that charge based on how much they drive, which can result in lower prices in months when they don’t drive too often.
Choose the cover that suits you. Drivers of older cars with little market value may want to consider opting out of optional add-on coverage such as collision and comprehensive coverage. For example, if you own a 15-year-old car that is worth less than $500, it may not be worth the money or even the chance to replace it after an accident.
Combine your insurance. Companies often offer discounts to customers who buy home, auto and/or renter’s insurance from the same company.
Increase your deductible. The deductible is the amount you pay for repair or replacement before an insurance company starts paying for a claim. Most companies offer the choice of paying a $500 or $1,000 deductible. Opting to go for a higher deductible will reduce the premium you pay monthly, which can mean big savings for drivers who go a long time without making a claim.
Install winter tires. Many insurance companies offer discounts to drivers who purchase and install winter tires.
Check if you qualify for an affinity program. People can often access discounts through organizations, associations, nonprofits, and clubs