Canadians could see even higher auto insurance premiums this year amid a growing crisis of car thefts in the country and other industry challenges, according to a new report.
In its auto insurance outlook for 2024 released on Jan. 26, Ratesdotca is anticipating another jump in premiums across the country this year.
Between December 2022 and December 2023, there was a nearly six per cent increase in passenger vehicle insurance premiums in Canada, according to Statistics Canada.
“We’re seeing a lot of insurance companies take on significant rate increases as a result of higher and disproportionate losses in 2023,” said Daniel Ivans, an insurance expert at Ratesdotca.
“So, as claims have begun to increase and payouts from insurers have continued to increase, as a result of that, we’re seeing increases in insurance premiums across the board as well,” he told Global News in an interview Monday.
The Ratesdotca report highlighted several factors influencing the auto insurance market.
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Among them is vehicle theft, which has become a so-called “epidemic” in Canada.
Nationally, more than 80,000 vehicles were stolen in the past year, according to the Insurance Bureau of Canada. In 2022, auto theft claims amounted to $1.2 billionc, with $700 million in Ontario alone.
Because of the big increase in theft claims, insurance companies are having to take on rate increases, but they are also giving consumers options to combat these theft claims by installing a tag anti-theft device or even a vehicle club for the steering wheel.
The federal government will be holding a national summit in Ottawa next month to try to find ways to tackle the country’s auto theft problem.
“We are taking steady action to address the rise of auto theft in this country,” said Treasury Board President Anita Anand during a press conference in Ottawa Monday.
“We want to make sure that we are doing what we can because we realize that this isn’t just a criminal law issue, it is also an issue relating to affordability,” she added.
When it comes to insurance premiums, inflation is another big factor, making it more costly to carry out repairs and maintenance.
Canada’s annual inflation rate went up 3.4 per cent last month, according to a Statistics Canada report published on Jan. 16.
In December 2023, the cost of passenger vehicle parts, maintenance and repairs increased by 5.6 per cent compared with the previous year, StatCan data showed.
Costs of maintenance and repairs are also being pushed up by advances in automobile technology, such as rearview cameras and bumper sensors, Ratesdotca said in its report.
“Vehicle repairs on newer and more advanced car models are complex and require specialized technicians and thus, higher labour costs,” the report stated, adding that complex repairs take longer to complete.
Ivans said since cars are becoming more intricate to repair, the average claim is a lot more expensive.
Electric vehicles (EV) also cost more and take longer to repair as they require original equipment parts and trained technicians.
Meanwhile, the auto industry is also continuing to face supply chain disruptions and shortages of vehicle parts that were first brought on by the COVID-19 pandemic.
The supply chain concerns have been heightened following the Houthi attacks against commercial ships and crew operating in the Red Sea this month. As a result, both Volvo and Tesla paused production at their factories in Europe.
When insurance companies file for rate increases that are approved by provincial regulatory authorities, they will need to demonstrate higher loss ratios and more being paid out on claims in order to justify premium increases to cover losses for the coming year, Ivans said.
“I think it’s important for consumers to understand that the premiums will increase every time that claims increase,” he said.
In Canada, it is mandatory by law to buy auto insurance if you own a car or other vehicle. The minimum requirement for coverage varies by provinces and territories.
© 2024 Global News, a division of Corus Entertainment Inc.