Why Are Auto Insurance Premiums Going Up and What Can I Do About It?
If you’re like most people, you’re probably asking yourself:
- Why are car insurance rates go up?
- Is there anything I can do to lower my auto insurance rate?
In this article, we’ll discuss factors affecting the market, ways to help lower your auto insurance rate and explain how optional coverage packages could help reduce out-of-pocket expenses in the event of a claim.
Why Are Car Insurance Rates Going Up?
There are many reasons for the current auto insurance rate increases across the country. Here are some of the notable ones:
Stats from Transport Canada show a rise in the severity of automobile accidents. In fact, the number of serious injuries, total injuries and fatalities all increased in 2021 compared to 2020.1
Increased Vehicle Value
Another contributor affecting the auto insurance market: The value of most vehicles — both new and used — is going up. In fact, used car prices are up 50%; new car prices are up 35.5%.2
What’s causing this? Like many of the other price increases happening in Canada and around the world today, there has been a rise in the demand for cars, SUVs and trucks — and their parts — at a time when supply is going down.
People still want new vehicles for the reasons they always have:
- Replacing cars that are aging out.
- Expanding families.
- Indulging passions for cars.
Vehicle supply is down in large part because key materials like semiconductors, which are needed for the computers found in cars today, experienced a manufacturing interruption in recent years.3 Although manufacturing has resumed, the current supply still runs short of demand.
More expensive cars and parts also make repairs and replacements costlier. As of August 2022, the cost of parts, maintenance and repairs were up 7.9% year over year.4 This is another factor affecting the auto insurance market.
Additional Factors That Could Impact Auto Insurance Rates
There are other factors not related to national and global events that could increase your auto insurance rates:
- If you’ve made claims on your policy in the last year.
- If you or anyone on your policy received a speeding ticket or other driving citations.
- A higher number of claims in the area you live in indicates that there may be more accidents related to weather changes, higher theft rates, more incidents of vandalism or other issues that the insurer must cover.
- If you moved to a higher risk area than you previously lived in.
- You may have taken advantage of insurance discounts in the past that you no longer qualify for.*
What You Can Do to Reduce Your Insurance Rates
While some insurance price increases are out of your control, there are things you can do to help get them in check.
- Practice safe and sound driving habits. Make sure everyone on your policy follows all the rules of the road and drives carefully, especially in difficult conditions and bad weather. This will help avoid tickets and accidents that could up your premium prices.
- Sign up for telematics. If you and the people on your policy drive safely and carefully, why not use it to save money? Telematics collects information about your driving habits in real time. By enrolling in a telematics program like from Travelers, you could save on your car insurance policy’s first term. At renewal, safe driving habits can lead to savings, though riskier driving habits may result in a higher premium.**
- Review coverage. If you haven’t checked your auto insurance and other coverage lately, review it with your insurance broker. They may find that you’re carrying duplicative or unnecessary protection. Additionally, they might be able to offer some ideas on how you can make your coverage more affordable.
- Raise your deductible. Often, increasing your deductible can help lower premiums. However, remember that you will be responsible for the deductible out-of-pocket and must always have enough cash on hand to cover your deductible if you need to make a claim.
- Look for discounts. Check to see if you are eligible for discounts like multiple vehicles, dual coverage or clean driving. Your insurance broker can help you find ways to save.
The Bottom Line