In 2023, car insurance premiums will rise by up to 20% for drivers across Canada. What will the rates be? Why is the rate so high? Is there something you can do to reduce your rates?
The inflation rate is increasing car insurance rates
Since 2021, everything has become more expensive. For the first time since 15 years, gas prices exceeded $4 a gallon and reached peaks of more than $5 a gallon. In 2022, food prices rose 11.4% compared with 2021. According to U.S. Bureau of Labor Statistics, auto insurance rates increased by 17.1% in the last year.
The increase in car repair costs is partly due to the more sophisticated cars, which have features such as backup cameras and antilock brakes. The consumer price index shows that more modern cars also mean higher car repair costs.
According to the 2023 Edmunds report on used vehicles, used car prices have increased by 44% since 2005. New car prices also rose. Insurance claims will be more costly as well due to the higher cost of vehicles and repairs. This also affects premiums.
J.D. Power conducted a survey that revealed 31% of auto insurance customers saw their rates increase over the past year. A survey by J.D. Power revealed that 31 percent of customers who purchase auto insurance have seen their rates increase in the last year. As you would expect, the customer satisfaction scores dropped by 12 points in a year, the largest drop in the 20-year history of the survey.
Douglas Heller is the director of Insurance at Consumer Federation of America. He says, “It’s worse than anything we have seen for a very long time.” Insurance companies had to adjust their prices after the pandemic that caused inflation.
Insurance costs are not the only factor that increases.
You can easily blame inflation for your rising rates. It’s just one part of the puzzle. The following are other factors that can cause car insurance to increase:
Cost increases for reinsurance (insurance by insurers).
The lingering effects of the pandemic are a major factor in insurance rates, especially the impact of repair costs on insurance claims.
The number of road accidents in the U.S. increased significantly after people returned to work late in 2020 or 2021. National Highway Traffic Safety Administration (NHTSA) reported an increase of fatal crashes from 2020 to 2021. This included the biggest jump in a 6-month period (18.4%).
Insurance claims are more expensive when you combine more accidents and higher repair costs. Kristine Pokrandt is an independent agent at Goosehead Insurance, Highwood, Illinois. She says that costs have increased across the board, which has contributed to people feeling different. The supply chain is still delayed, so it’s taking longer to repair the car. . . These costs must be spread out somewhere .”
Climate Change Effects
In the past, companies would raise their rates if they expected more claims to be filed in the future. In areas affected by wildfires and floods, insurance rates increase because the area is more costly to cover.
According to National Centers for Environmental Information, nine weather and climate related events have occurred in 2023, causing damage of over $1 billion. Insurance rates in these areas will continue to rise as climate catastrophes become more common in some states. In some states, insurance companies have stopped selling new policies.
Reinsurance and its effects
Reinsurance is a whole industry that assists insurers in paying claims. Reinsurance is a form of insurance that insurers purchase, just as you would car insurance. Reinsurance costs are rising.
Florida insurance companies, for example, are experiencing large reinsurance rates spikes that could impact Floridians directly. Florida’s auto insurance is already 30 percent more expensive this year than it was last.
Heller explains that auto and home insurance is well-regulated, while the reinsurance sector has not. The result is a wide range of pricing between insurers, as well as by state. This change in cost gets passed on to the policyholders.
What can you do in order to maintain your rate?
Be honest, your insurance premiums are unlikely to drop on their own. Maybe not in 2023 and possibly never. You can find other ways to save.
Pokrandt says that connecting with an insurance agent is one of the best things you can do to help yourself. Agents are familiar with the specifics of their industry. Even if you have to shop for a brand new policy, they can still help. An insurance agent can help you discover any discounts and options that are available.
Don’t cut back on your insurance coverage to save some money. You’ll need insurance if you are involved in an auto accident and must make a claim. Pokrandt says that cheap insurance only makes sense if it is not needed. You should look at insurance more as a financial tool. . . It’s important to understand the policy you have and make sure that you are using all of its bells and whistles.
You have no control over inflation, climate changes, reinsurance costs, or the effects of pandemics. By working with an agent, you’ll be able to keep your coverage at a more affordable price.