You received your car insurance renewal and the price has gone up – without explanation as to why. Unfortunately, many of the reasons for a renewal increase come from factors within the insurance marketplace and are outside of your control. Insurance industry actuaries refer to rate increases as “rate adequacy.” The insurance industry is a major part of our economy, and as a broker, we can help demystify the complexities.
It’s more commonly known that premiums may increase as a consequence of your driving behavior, such as the following examples:
▪️ Involvement in an at-fault collision.
▪️ Receiving traffic tickets or similar violations – the more severe the violation, the higher your rates could rise.
▪️ Suspension of license due to a traffic violation will have a large impact on your premium.
*Note: If your license has been suspended for administrative or medical reasons, it should not affect your premium.
However, there are other facts that directly impact premium increases that are not a result of any action on your part. Below are examples of how an insurance rate increase is affected as a result of an adapting insurance industry:
▪️ New cars have higher repair costs: Older cars were less expensive to repair, so claims and rates were lower. However, due to the heightened repair costs insurance companies have to pay, rates have increased.
▪️ Increase in reckless driving: With distracted driving rates at record highs, the number of claims is increasing and the damage can be more severe and costly.
▪️ Car insurance fraud: Insurance fraud is a significant problem that negatively impacts the industry. According to the Insurance Bureau of Canada, insurance fraud from auto alone costs drivers 1.6 billion per year, or $236 per driver.
▪️ Medical services are becoming more expensive: As the number of claims increases, the number of people requiring healthcare increases. Insurance companies have to factor this information into premiums.
▪️ Local trends for increased risks: Insurance premiums are also affected by local area statistics. If you are at heightened risk of having an accident, the insurance costs will increase as a result.
Although there are many factors outside of your control that could cause a rate increase, you can help limit the amount you pay by taking advantage of discounts and increasing your deductible.