Auto insurance premiums are set to climb this year as inflation, supply chain issues and theft make it more expensive to insure a vehicle, according to a new report.
The analysis from RATESDOTCA, released on Monday, found insurance premiums climbed six per cent between December 2022 and December 2023. With sticky inflation and anticipated insurance rate increases, Canadians can expect to pay more again this year, the report found.
“Many of the same factors that forced insurers to raise rates in 2023 are still factors as we move into 2024,” says Daniel Ivans, RATESDOTCA insurance expert and licensed insurance broker, wrote in a news release on the finders.
“Inflation is still running high, auto theft is rampant in certain provinces and we are still seeing parts shortages and repair delays. All of these play a role in rising insurance premiums.”
Auto theft 'crisis'
RATESDOTCA describes auto theft as a “national crisis” that has caused insurance premiums to risk upwards of 50 per cent for at-risk vehicles. Owners could face a $500 surcharge unless they install an anti-theft system.
Auto repairs are also making rate more expensive, as supply chain issues drive up the prices for parts and advanced car technology makes vehicle repair more specialized, the report found.
Insurance rates are also a factor. The Financial Services Regulatory Authority of Canada recently approved several rate increases for auto insurers, which take effect at some point in the first half of this year, depending on the provider.
Relief incoming?
While the report predicts insurance premium increases for the year, it also noted some cause for optimism.
For one, economists largely expect inflation to come down this year, and with it, insurance premiums should dip as well.
“Insurance premiums are affected by the increase in price of goods, services, and labour,” the report stated. “If inflation eases this year, it will help insurers recoup some of their physical damage losses.”
Additionally, provincial legislation in Alberta and Ontario could make auto insurance more affordable for drivers in those provinces.
Alberta, the province with highest claim frequencies, has introduced an insurance rate cap of 3.7 per cent for good drivers – though critics of the plan worry it may drive some companies out of the province and could have Albertans paying out-of-pocket for claims to avoid losing that “good driver” status, the report said.
In Ontario, meanwhile, changes that took effect this month allow Ontarians to opt out of Direct Compensation - Property Damage (DCPD), which will drive down premiums, though taking this option puts drivers at risk of losing reimbursem*nt in the event of a not-at-fault collision.
