Auto insurance rates across Canada have recently been on the rise. While the increases are higher in some regions than others, almost all Canadians have seen a spike in vehicle insurance, whether or not they have filed claims in the past.
Car insurance rates in Canada have been steadily rising. Reasons for this are a combination of many factors. Some regions such as Ontario and, in particular, Toronto, have seen high spikes in car insurance rates. The reasons for the increases are many and varied. However, population density and the resultant high numbers of vehicles on the road are among the leading causes of high vehicle insurance rates in Canada.
If you ever wondered “Why is my car insurance so high?”, here are ten of the possible reasons:
1. Population Density
Many first time car owners often wonder why their car insurance is so high. Some regions in Canada, such as Toronto, have extremely high car insurance rates. Toronto and surrounding areas are densely populated, meaning they have a higher number of cars on the road compared to other regions in Canada. As a result, there are more road accidents and hence higher claims in Toronto. This scenario has impacted auto insurance in Ontario particularly. Their rates are often higher than other regions like car insurance St Catharines.
2. Severe Weather
IBC 2018 estimates put damages caused by severe weather at $1.9 billion. Cumulative incidences of severe weather often lead to a rise in auto insurance. For instance, in Ontario, various incidences of extreme weather in 2018 cost the industry a total of $1.04 billion.
That’s just one province in a single year! Rope in the rest of Canada and you have natural disasters and severe weather patterns such as the 2013 South Alberta floods that cost the country $4 billion in damages and the 2016 wildfires in Fort McMurray that left the nation reeling under $3.6 billion worth of damages.
3. Driver History
In an ideal situation, a driver’s history of safe and accident-free driving should translate into lower auto insurance rates. Well, that ideal situation does not exist in Canada. Drivers’ habits in a particular area are aggregated to calculate the applicable rates in the region.
In plain English, this means that a good driver will still be charged high rates if the majority of drivers in his or her area have a history of reckless driving. The rate is pegged more on collective driving habits than the safe driving habits of individual drivers.
4. Car Insurance Fraud
Another contributor to high auto insurance in Canada is fraud, which, in 2017, stood at $1.6 billion according to Ontario’s Finance Minister. This scenario, observes the Insurance Bureau of Canada (IBC), pushes auto insurance premiums up by as much as 15%.
5. Costly Vehicles
Vehicles cost considerably more today than they did ten or twenty years ago. They now come fitted with built-in GPS, data processing apps, advanced driver-assisted devices, smart displays, smartphone integration, and rear-view cameras. Higher replacement costs translate into high monthly premiums.
6. High Inflation
Another cause of exorbitant insurance rates is high inflation. There’s not much one can do about high inflation as it’s pegged on the health of the economy.
7. Too Many Tickets
Drivers with the habit of picking up tickets aren’t popular with auto insurance companies. A ticket-free driver pays less for auto insurance than bad drivers. A driver with a ticket-free history is unlikely to file a claim. In return, they usually pay lower auto insurance.
To qualify for subsidized auto insurance, the car insurance company has to ascertain how safe a driver is. Multiple moving violations are bound to hurt your case. When you are viewed as a “high-risk driver,” you’re bound to attract higher auto insurance premiums.
Besides the violations, how much you pay in premiums depends on the severity and type of offence. For instance, if the offence involves texting while driving, you could end up paying 22% higher premiums. On the other hand, a DUI charge is often punished with a 77% higher rate.
8. Driving a Car without Insurance
If convicted of driving a vehicle without car insurance, you’re likely to be charged higher premiums. Some insurance companies might altogether deny car insurance in such a case.
9. The Age Factor
Ordinarily, young drivers are charged higher auto insurance premiums. This is in recognition of the fact that they are more likely to cause accidents and are therefore riskier to insure. While they account for 24% of fatalities, 16 to 24 year olds represent 13% of drivers. They also cause 26% of road accident injuries.
10. Distracted Driving
Collisions usually trigger insurance claims. Distracted driving is a leading cause of road accidents, which is one of the major reasons insurance premiums are so high in Canada. Rear-end collisions are a key indicator of distracted driving, which accounts for the majority of claims.
It doesn’t help that vehicles today feature expensive gadgets. These include backup cameras and embedded sensors. For instance, today’s fender benders cost much more. This in turn makes insuring high-cost vehicles an expensive undertaking.
