Have your insurance costs increased in the past few years? For most Canadians, the answer is probably yes.
Although ICBC was able to substantially lower their rates this year for most drivers, most insurance companies have had to increase their rates the past few years to ensure they continue to collect enough premium to pay for claims. We touched on this in 2020 with our Volatile Marketplace post, but there are a number of reasons why insurance rates are rising:
Climate change is one of the largest factors in increasing insurance rates.
A rise in global temperature and an increase in extreme weather events has led to more catastrophic losses (an insurance way of saying major, widespread damage to people, places and things).
From tropical storms in Asia & Latin America, wildfires in Australia and Canada, and flooding most recently in Germany and China, billions of dollars – sometimes hundreds of billions of dollars – in insured damage is occurring each year around the world.
While local events will have the biggest impact on your premiums, insurance is a global marketplace, which means a major loss in one country will affect everyone.
What can I do?
There are lots of things all of us can do help fight climate change, from eating locally grown foods to taking political action. The David Suzuki Foundation has a list of the top 10 things you can do to stop climate change, found here.
Construction & Repair Costs
If you’ve built anything in the past year, you know the costs of materials have shot right up. Lumber, steel, drywall and labour costs have all increased, some as much as 400%. Much of this was triggered by the pandemic when mills and factories shut down but people ramped up home renovation projects, but forest fires and pine beetles have also contributed to shortages. (We went into detail about this in our Construction Costs post in May, find it here.)
Buildings are not the only things with rising repair costs, though. Costs of vehicle repairs have also increased the past few years. According to Quebec’s Groupement des assureurs automobiles (a group founded to safeguard consumers’ interest and ensure access to insurance for everyone at fair rates), the average costs to repair a vehicle after a collision increased 32% between 2009 and 2019.
There are a number of reasons for this surge, including:
- A shortage of parts, particularly for luxury vehicles
- The addition of safety and technology features – from windshields to bumpers to mirrors, newer cars have all kinds of sensors and cameras that can make even small repairs
- The use of LED lightbulbs (this may not seem like much, but many cars have upwards of 9 sets of lights on them, so it can add up)
- Higher labour As vehicle technology increases, so does the labour force’s training and skills, and therefore their wages
Low Interest Rates
Insurance companies invest their money to help cover the costs of paying out claims. Earning interest on their investments means they can charge you a little less, because they have an additional source of income to bolster the premiums their clients pay.
In recent years, low interest rates in Canada have meant less income for insurers, so they have had to rely more heavily on premium collection to have the capital required to pay out claims.
Extreme weather, low interest rates and increased construction costs are some of the major things impacting insurance consumers everywhere. However, there are also individual reasons why your insurance premium would increase, such as:
- Making one or more claims in the last 3-5 years
- Adding a second or third mortgage to your home
- Renovating your home or condo
- Changing or expanding your business operations
- Uninstalling an alarm system
- An increase in claims or the potential for claims in your neighbourhood
- Not making necessary upgrades to your house/building
- Changing the primary heat source in your home
- Moving to a new location
- Renting out a suite in your home or taking in boarders
How can I lower my premium?
To lower your insurance premiums:
- Avoid making small claims
- Carefully maintain your home, vehicle, watercraft or business
- Make any necessary upgrades to plumbing, wiring, roofs and heating right away
- Install a monitored alarm system
- Install water mitigation devices, like sump pumps, backwater valves and sensors
For your home insurance, specifically, consenting to rating by credit score can also significantly lower your annual premium. For more info on using your credit score to benefit your insurance, click here.
To learn more about the factors influencing your insurance premium – whether that’s home, auto or business – talk to your broker today.