Impending Surge in Canadian Auto Insurance Premiums Due to Car Theft Crisis and Other Challenges
Canadians may experience a rise in auto insurance premiums throughout the year as the country grapples with an increasing number of car thefts among other pressing issues within the industry. According to a recent study by Ratesdotca released on January 26, 2024, insurance costs are expected to climb nationwide.
Statistics Canada reported a near six-percent rise in passenger vehicle insurance premiums between December 2022 and December 2023. "Significant rate increases from insurance companies are a response to heightened and disproportionate losses experienced in 2023," Daniel Ivans, an insurance specialist at Ratesdotca, explained in a recent interview with Global News.
The report by Ratesdotca sheds light on multiple factors affecting the auto insurance market including rampant vehicle theft. Over the past year, more than 80,000 vehicles were stolen across Canada, with the Insurance Bureau of Canada citing auto theft claims reaching $1.2 billion in 2022, with Ontario witnessing $700 million alone.
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Efforts to curb these theft-related claims have led insurance companies to offer consumers preventive solutions such as antitheft tagging devices or steering wheel clubs. Additionally, the federal government plans to confront this crisis by hosting a national summit in Ottawa next month, aiming to develop strategies to mitigate the nationwide auto theft dilemma. Treasury Board President Anita Anand emphasized the urgency and breadth of the issue in a recent press conference, highlighting its implications not only on criminal law but also on affordability.
Further aggravating the insurance premium hike is inflation, particularly affecting the cost of vehicle repairs and maintenance, which rose by approximately 5.6 percent year-over-year as reported in December 2023. Advancements in automotive technology introduce new challenges like incorporating sensors and cameras, which necessitate specialized technicians resulting in higher labor costs and extended repair times.
The increasing complexity and cost implications extend to electric vehicles (EVs), which demand original equipment parts and trained professionals for repairs, often resulting in prolonged maintenance periods. Moreover, persistent supply chain disruptions, a residual effect of the COVID-19 pandemic, continually impact the availability of vehicle parts, further complicating the auto industry landscape. Recent geopolitical tensions, like the Houthi attacks in the Red Sea, have also contributed to these disruptions, affecting major manufacturers like Volvo and Tesla.
When insurance companies seek rate increases, they must demonstrate to provincial regulatory bodies a justification for these hikes, which usually involves showing an uptick in loss ratios and claim payouts. Ivans cautioned that consumers should brace for these inevitable increases as claims rise.
Mandatory auto insurance laws across Canada underscore the necessity for vehicle owners to stay informed about changing dynamics in the insurance market, reflecting provincial and territorial coverage requirements. Awareness and understanding of these factors can aid consumers in navigating future expenses more effectively.
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This complex situation underscores the intertwined challenges of industry economics, technological advancements, and broader economic conditions affecting Canadian auto insurance markets. As these issues continue to evolve, the impact on consumers and the industry will likely prompt further governmental and business strategies to mitigate increases while addressing systemic problems like auto theft and part shortages.
Words by: Craig Clowes
Credits
globalnews.ca
