Why did my auto insurance go up in 2024?

By HUB SmartCoverage Team on October 8th, 2024

When you get your auto insurance renewal and your premiums have gone up - sometimes substantially - the first question you ask is why.

The cost of living has risen for everyone and that includes auto insurance. It’s important to understand the main factors contributing to these increases which will better equip you to take steps to reduce rates.

1. Auto theft

One of the biggest challenges for insurers is the auto theft crisis which, in turn, is hitting people in the pocketbook.

Recent data released by the Insurance Bureau of Canada (IBC) reveals in 2023 the cost of insurance claims to replace stolen vehicles in Canada skyrocketed to a record-breaking $1.5 billion – an increase of 254% since 2018. The problem is worse in Ontario, where auto theft claims costs increased 524% between 2018 and 2023, surpassing $1 billion for the first time last year.

Claims costs impact premiums because insurers price them based, in part, on the level of risk associated with a vehicle. Vehicles with the highest risk of theft will typically be more expensive to insure. IBC estimates that auto theft adds approximately $130 to the average annual premium in Ontario.

While Équité Association reports in its First Half of 2024: Auto Theft Trend Report the first six months of 2024 have shown a decrease in thefts of 17 per cent compared to the same period in 2023, there’s still more to be done to combat theft, IBC says.

2. Lingering inflation and supply chain issues

While overall inflation in Canada has been decreasing in 2024, it’s a different story when it comes to the costs that directly impact auto insurance claims.

At the height of Canada’s inflation crisis, the Consumer Price Index (a measure of the average change over time in the prices paid by consumers for consumer goods and services) rose to 8.1% in June 2022. However, according to Statistics Canada data, insurers were seeing auto insurance claims costs much higher than the peak inflation rate. For example, over the past three years the cost for new passenger vehicles increased by 12.1%, while the cost of vehicle parts and replacement increased by 18%.

3. More sophisticated technology

Insurance premiums can also be affected by new technology in vehicles. This makes repairs more expensive and increases claims costs. While new cars come with significant safety features like blind spot monitoring, this technology requires sophisticated sensors. When damaged in a crash, a bumper with these sensors is more costly to repair than a one without these built-in safety features.

For example, a 2017 Toyota Rav 4 rear bumper requires 17 parts and a total average cost of $2,769 to repair. The 2022 model of the same vehicle requires 39 parts and costs an average of $4,144 to repair – an increase of 50%.

Other factors include legal costs and government regulatory intervention in the auto insurance system – all of which can ultimately have consequences for consumers.

Personal reasons for increase

But there are also personal and societal reasons your premiums may have risen.

Your particular driver profile, which includes factors like where you live, your age, gender, credit report and driving record – for example, if you’ve had an accident or traffic violations - influences what you pay. Your claims history matters too.

Factors such as the make and model you drive and the cost to repair it determine how much you will pay for insurance. Whether you lease or own your vehicle, own a house or rent can also impact rates. If you drive a lot, the risk of an accident naturally increases. For that reason, insurers also tend to charge higher rates to those who spend more time on the road.

How to save on premiums

Working with your insurance broker, there are a number of things you can do to combat rising rates. These include:

Shop around. If you live in a province, such as Ontario, that does not have a single, public insurer your broker will be able to compare different companies but make sure you’re comparing apples to apples. If you’re notified upon renewal your rates will increase, use the 30- to 60-day notice period to your advantage.
Increase the deductible. Increasing your deductible – the amount you pay should you need to make a claim –can reduce rates. Make sure you are able to handle that amount if you need to file a claim.
Don’t over insure. Drive an older car with little market value? One option is to consider not purchasing collision or comprehensive coverage.
Enrol in a usage-based program.More Canadian drivers are turning to usage-based insurance – also known as telematics - to try and save money on premiums. This involves the use of smart technology to monitor driving behaviour. Data collected from sensors measure such things as speed, trip distance and time, location, harsh braking and cornering, and distracted driving. Safer drivers save. However the savings won’t start until your policy is up for renewal.
Stay claims free. Having a clean driving record is one of the best ways to keep premiums down.
Pay annually. If you pay for the entire year of insurance all at once, you save an administrative fee.

Discounts

Your broker may be able to hunt down discounts. Be sure to ask. Some include:

Bundling. Having your home and auto insurance policies with the same insurer can save. If you have another property, such as a cottage, that works too.
Winter tires.Changing your tires when the cold weather sets in makes your vehicle safer. In Ontario, for example, it’s mandatory for insurance companies to give drivers a five per cent discount if they install winter tires. Depending on the insurer, however, you’ll have to put them on by a certain date (normally November 1 or December 1) and keep them on for a set period (normally March 15 or April 1).
Multi-vehicle discount - Insuring multiple vehicles under the same policy can help. This is useful when family members live in the same household but drive separate vehicles.
Alumni group discount– If you graduated from a particular college or university, they may offer a discount.
Use anti-theft devices – The less attractive your vehicle is to thieves, the better. After-market security devices such as anti-theft recovery systems are even being offered by some insurers because it assists in vehicle recovery.
Professional associations– People can sometimes access discounts through organizations, associations, non-profits and clubs.

With files from Insurance Bureau of Canada

Higher premiums driving motorists to usage based insurance