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Q&A with an industry expert: What's the reason for the insurance rate increase

Written by Sebastien Vachon  |  Published on: January 5, 2024  |  Credits: Economical Insurance | Updated: February 2024

These days, it seems like everything is getting more expensive. From food to housing to insurance rates, prices are on the rise. Along with the frustration that comes with spending more of your hard-earned money, you might be wondering why your insurance premiums are going up and whether you’re the only one dealing with higher rates.

Transparency is more important now than ever, so Sebastien Vachon, Regional VP, Quebec at Definity is sharing his insurance expertise to shed some light on why car and home insurance rates have gone up, what you can expect to see in the coming years, and some ways you might be able to save on insurance.

Q. Why have car and home insurance premiums gone up?

A. When it comes to car insurance rates, there are a few key factors affecting the entire insurance industry:

  • Inflation. Today’s higher prices on parts, new and used vehicles, rentals, and labour make it more expensive for insurers to pay out damage-related claims.

  • Rising claims frequency. More people are back on the road as they return to the office, so the number of insurance claims has increased. More claims and higher repair and replacement costs mean higher insurance rates.

  • Rising rates of car theft. COVID-19 led to significant supply chain disruptions, so there was a lower supply of new and used vehicles available to purchase. This led to drastically inflated prices for all vehicles. As a result, car theft has become significantly more frequent, especially in Ontario and Quebec, where organized crime is more common.

Home insurance rates have also gone up thanks to a couple of main factors:

  • Inflation. The cost of materials, labour, and homes has increased significantly in the last few years, which means the cost of home repairs after damage-related claims has also risen.

  • The heightened frequency and severity of natural disasters. A growing number of severe weather events means insurers are seeing a rise in costly home insurance claims. 

Q. When did insurance rates start to increase?

A. Prices have been going up for a while, but at a slower rate than they are now. COVID-19 had a massive effect on the global economy, causing inflation to skyrocket and prices to rise drastically. At the same time, claims frequency increased, creating the perfect storm for rising insurance rates.

Most insurers had a delayed response to these trends since rate increases only occur when insurance policies renew each year. Many customers are now seeing the effects of rising rates.

Q. I’m a long-time, claims-free customer. Shouldn’t my insurance premiums be going down?

A. Unfortunately, everyone’s rates are rising — even claims-free customers with perfect driving records. If you’re a great customer, you can rest assured that you’re still paying less than a customer with a poor driving history or multiple insurance claims. So, it pays off to continue driving safely and safeguarding your home against risks!

Q. Are car and home insurance premiums rising at the same rate?

A. No. Car insurance is seeing rates increase much more quickly than home insurance. The factors affecting car insurance rates have been more sudden and drastic, leading to more pronounced rate increases in recent years.

In comparison, home insurance rates have already been moderately elevated for several years.

Q. Are specific vehicles and locations affected more by rising car insurance rates?

A. Yes. Certain makes, models, and years of vehicles are more likely to be stolen now than they were even just a few years ago, so some drivers may experience premium increases to compensate for the increased risk that comes with driving a more commonly stolen vehicle.

Car theft is also becoming much more common in Ontario and Quebec, so drivers in these provinces (especially in larger urban centres) are likely to see more rapid rate increases than drivers in other regions.

Q. Are specific properties and locations affected more by rising home insurance rates?

A. Yes. A big part of property insurance is coverage for weather-related damage, so if the risk for wildfires, hurricanes, tornadoes, flood, and other severe weather events has increased in your area, you’re likely to experience a rate increase.

Q. Can we expect insurance rates to level off at any point?

A. We’re seeing signs that inflation is levelling off, new vehicle supply is improving, and car prices have started to stabilize. This shows that market conditions are levelling off, which will hopefully affect the insurance industry in a positive way, too.

Q. How can I be proactive and save on insurance?

A. There are a few ways you can save on insurance, even while rates are rising. If you drive a commonly stolen vehicle, consider installing an aftermarket anti-theft device in your car, like an anti-theft vehicle tracking system or a steering wheel lock or. Depending on your location and insurer, these devices may help you qualify for a discount on your car insurance.

Increasing your deductibles could also help you save on your car and home insurance premiums. Before committing to a higher deductible on one or both of your insurance policies, make sure you first consider whether you’d be able to pay the higher out-of-pocket fee if you need to make a claim.

Q. My insurance renewal is coming up soon. Is it better to shop around or stay with my current insurer?

A. There’s never any harm in shopping around for multiple quotes on car and home insurance. You never know — you may qualify for different discounts or be able to take advantage of exclusive group rates with a different insurer. Always compare identical coverages to see which insurer offers the best rate for the specific coverage you need — sometimes it may look like one insurer is offering a lower rate than another, but the coverage and services offered aren’t necessarily the same.

You’re not alone if you’ve received a rate increase on your recent home or car insurance policy renewal. The insurance industry is experiencing significant cost increases, and unfortunately, everyone is affected. Luckily, you can take steps to save money where possible while still getting the coverage you need for your car and home. Reach out to your broker to discuss your options and explore what discounts could help you save on insurance.


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