“Why did my car insurance go up?”

This is a question that every insurance broker in the country gets on the regular these days because Canadian insurance companies have been increasing their prices across the board. Even people with perfect driving records are seeing their prices go up. This can be very frustrating, especially if you don’t understand the reasons behind your price increase, so we’re here to provide some clarity. We’ll also cover a few ways you may be able to lower your car insurance payments.

We’ll start with the “why?” There are a number of factors that can cause your car insurance price to increase on renewal. These can generally be broken down into two categories:

• Things that impact your driving record or insurance history (these things are generally within your control)
• Things that impact insurance claim payouts in general (these things are generally outside of your control and impact everyone or larger groups of people, not just you as an individual)

Things that impact your driving record or insurance history

This one’s pretty straightforward – your driving record and insurance history have a big impact on your insurance price. If you do things that hurt your driving record or insurance history, your price will go up.

At-fault car accidents

If you get in a car accident that’s determined to be your fault and an insurance claim is put through by you or the other party in the accident, your insurance history will be impacted. This will likely cause your insurance premium go up (unless you have something called “accident forgiveness” on your policy). The good news is that insurance companies reward their clients based on the number of years they go without a claim against their policy for an at-fault collision. So, while your premium will be affected when the accident happens, you can improve your reputation and lower your price again in the coming years by driving safely.

Traffic tickets and other violations

Things like speeding tickets, distracted driving tickets, DUIs, etc. fall into this category. The more serious the offence, the bigger the impact it will have on your price. For example, a single minor speeding ticket (less than 10km/hour over the speed limit) may have a minimal impact on your price, while getting convicted for driving under the influence of alcohol or cannabis will have much more severe consequences. Major offenses may even cause your insurance company to “get off risk” (cancel your policy), requiring you to set up high risk auto insurance (which is way more expensive than regular auto insurance!)

Drivers license suspensions

If your drivers license gets suspended because of a traffic violation, such as impaired driving, or any other serious offense, your insurance price will go up. On the other hand, if your license is simply suspended because you forgot to renew it or because you have a medical condition which affects your driving, these factors likely won’t increase your premium.

Insurance payment issues

Many people don’t realize just how much missed payments or cancellations for non-payment can impact their insurance record. Many companies will require you to pay your insurance premium in full if you miss insurance payments during the year. If you let your policy get cancelled for non-payment, chances are that same insurance company won’t offer you a new policy and you will be required to set up insurance with a high-risk auto insurance company at a much higher price point.

Things that impact insurance claim payouts in general

Over the past few years, most insurance companies in Canada have operated at a loss due to the rising cost of insurance claims, which is why they are looking to increase their prices. There are a number of things causing the cost of insurance claims to increase.

It’s more expensive to repair modern vehicles

The modern features and fancy gadgets that make our cars so fun, convenient and safe to drive also make them more expensive to repair.

These things include:

• Blind spot monitoring
• Adaptive cruise control
• Lane departure warnings
• Backup cameras and sensors
• Smartphone connectivity

A decade ago, if you backed into someone in a parking lot and had to replace their bumper, it might set you back $300 to $500. Depending on how high your deductible was, you might just pay out-of-pocket instead of putting in an insurance claim to keep your insurance price from going up. Today if you need to replace a bumper on a modern car, you’re looking at a lot more than just metal and paint – that bumper likely has sensors, a backup camera, etc. You could be looking at an extra zero – $3,000 to $5,000 instead of $300 to $500! This is causing more people to put through insurance claims for minor accidents and fender benders, and the cost of those claims is much higher than it used to be.

Distracted driving is becoming a major issue

See that guy sitting next to you in traffic texting his buddy? Yeah, he factors into your price increase too. Not only is the cost to repair modern vehicles higher now than it used to be, we’re also seeing a rise in the number of accidents, and distracted driving is a major reason why. Nearly 3 out of 4 Canadian drivers admit to driving distracted, and research shows you’re 23 times more likely to crash if you text while driving – you do the math!

If you want to help keep car insurance prices down (not to mention save some lives!), do whatever you can to help stop distracted driving. One simple thing you can do to remove the temptation to drive distracted is put your phone on “Do Not Disturb While Driving” mode and encourage your friends to do the same. In fact, do us a favor, and next time you see one of your friends texting and driving, wait until they’re safely parked and give them a swift smack upside the head.

The cost of medical services are rising

Just like the cost of vehicle repairs has increased, so has the cost of health care services. If you require physiotherapy or any other type of medical service due to an accident-related injury, the cost of this treatment will be higher than in years past. This price increase also raises your premiums.

Medical services fraud is prolific in Canada

Every year, Canadians unknowingly fall victim to medical services fraud after being involved in a car accident. Examples of medical services fraud include being overcharged for medical services, receiving / being billed for unnecessary medical procedures, or simply receiving / being billed for for uncovered medical procedures. The Insurance Bureau of Canada has identified medical services fraud as a top priority for 2019 and is carrying out various enforcement strategies to try to reduce the problem.

Canada’s climate is changing, which means more weather severe events

The Canadian Government recently released a new climate change report revealing that Canada’s climate is warming twice as fast as the global average. These changes are having clear impacts, including heavy rain (leading to severe flooding), longer and hotter heatwaves in the summertime (resulting in catastrophic wildfires), and other extreme weather events. Several catastrophes resulted in above-average insured losses in 2018 and this trend is expected to continue, increasing the number of insurance claims that must be paid out by insurance companies and contributing to rising insurance prices.

Car insurance fraud is a huge problem in Canada

Car insurance fraud costs Canadians over $2 billion every year. In a recent study, Aviva Canada followed damaged cars from the time they were in an accident until they were repaired (and invoices submitted), and what they found was quite shocking – 9/10 cases involved fraud! Fraud can happen during any stage of the insurance process and your claim can be exposed to fraud through no fault of your own / without your knowledge.

Aviva Canada has recommended a 5 point action plan to help fight fraud, and insurance companies are starting to crack down more on fraud in recent years, but more needs to be done and government intervention is needed. You can play your part as well by following these tips from the Insurance Bureau of Canada.

While your insurance company diligently investigates all instances of fraud and tries to minimize the effect it has on your premium, it does still have a direct impact.

There could be crime trends in your area

Depending on where you live, your vehicle may be more likely to be broken into, stolen, damaged due to extreme weather, exposed to traffic, or involved in an accident. So, if your insurance company determines via their advanced data analytics systems that the area you live in has become more at-risk, your price could go up for that reason. This increase makes it possible for your insurance company to make all necessary payouts when claims are made in these areas, so everyone can be secure.

How claim payouts impact insurance prices

Insurance, like many other products and services, goes through “market cycles” wherein prices rise and fall in response to changes in the larger market. Claim payouts directly impact these cycles, playing a role in how “soft markets” and “hard markets” evolve.

How insurance cycles work – soft markets & hard markets

• A “soft market” occurs when insurance companies are making a good profit. Since companies are making money, they want to sell more policies. This leads to more competition, lower insurance premiums (lower prices), less strict underwriting rules, broader coverage, and more flexible / favourable payment options.
• A “hard market” occurs when insurance companies are losing money or making very limited profits and don’t feel it’s worth the risk to write new business. In this situation, most insurance companies don’t actually want to write new business until they’re able to increase their prices and become profitable again. This leads to higher insurance premiums (higher prices), stricter underwriting rules,  more restricted coverage, and less flexible / favourable payment options.

The insurance industry in Nova Scotia has been in a “soft market” for the past 10-15 years. During this time, Nova Scotians have enjoyed relatively stable insurance rates, lots of selection, and access to convenient payment options. However, over the past few years, claim payouts have been on the rise due to the factors outlined above so many insurance companies have been losing money.

This is causing insurance companies to apply for rate increases, tighten up their underwriting rules, and pull back on payment plan offerings. This is causing prices to go up and making it hard to get a policy and/or payment plan if you’re a high risk driver or have a complicated payment history.

How car insurance pricing increases work in Nova Scotia

What you may not know about insurance pricing in Nova Scotia is that insurance companies can’t simply jack their rates up whenever they want. Car insurance is regulated by the government in Nova Scotia so companies have to file for rate increases and go through a grueling approval process before they’re able to raise their rates. The office of the superintendent of insurance is responsible for accepting or rejecting rate filings based on applications. Companies need to prove that a rate increase is required to maintain profitability in order to be approved.

Since the government is ultimately responsible for approving insurance price increases in Nova Scotia, you can always write your local MLA if you’re upset about your price increase.

SO – how can you save money on your car insurance?

There are a few different ways you may be able lower your insurance premium if it went up on renewal this year. You could:

• Increase your deductible(s)
• Bundle your car insurance with your home or tenant insurance to take advantage of multi-policy discounts
• See if the company you’re with offers a “telematics” or “usage-based insurance” program where you can get a discount if you have good driving habits
• Check if there are any car insurance discounts you may be able to take advantage of

Talk to your insurance broker to see what type of savings you may be eligible for. And drive safely!

If you’re a Cheep Insurance client, we’d be happy to review your policy to see if we can save you some money via one of the methods described above. We can also “shop” your policy for you to see if there’s an insurance company with a better price for you than the one you’re with now. We have one of Atlantic Canada’s largest selection of car insurance companies and can compare rates from 10+ companies for you.

If you’re eligible for a better price with a different company that we write with, we can help you get everything switched over. Give us a call at 902.463.1675 or email our support team at support@cheepinsurance.ca if you’d like us to take a look for you!

Remember, the hard market is hard on your insurance broker too!

If your broker is shopping your policy for you / seeing what they can do to bring your price down, please be kind, patient and respectful! Chances are, the broker you’re speaking with had a price increase on their own personal policy this year as well, and the prices are set by the insurance companies, not the brokers, so your broker isn’t responsible for your price increase. Often times, people end up taking their anger regarding their price increase out on their broker when their broker is just trying to help, especially in this market. Our amazing team is working harder than ever to shop prices for all our clients who request it, so please be patient with them as they’re working extra hard to do the very best they can for each and every one of our clients!

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