Top 10 Reasons Why Your Insurance Premiums are Going Up

Auto insurance premiums in Ontario have been steadily increasing, causing concern among drivers across the province. Various factors contribute to this trend, reflecting broader economic, regulatory, and societal changes. Here, we'll explore the main reasons behind the rising cost of auto insurance in Ontario, backed by specific facts and data from 2023 and 2024 from IBC.

1. *Increased Claims Frequency and Severity*

One of the primary reasons for rising auto insurance premiums in Ontario is the increase in both the frequency and severity of claims. Several factors contribute to this trend:

- *Distracted Driving:* The prevalence of distracted driving, often due to mobile phone use, has led to more accidents. According to a 2023 report by Ontario’s Ministry of Transportation, distracted driving accounted for 25% of fatal collisions in the province.

- *Higher Repair Costs:* Modern vehicles are equipped with advanced technologies and materials, making repairs more expensive. The Insurance Bureau of Canada (IBC) reported that the average cost of repairing a vehicle in Ontario increased by approximately 30% from 2020 to 2023.

2. *Rise in Auto Theft*

Auto theft is a growing concern across Canada and has a direct impact on insurance premiums, including those in Ontario. Auto theft is a crisis that’s affecting Canadians across the country, and is being felt most acutely in Ontario. In 2022, more than 105,000 vehicles were stolen across Canada. That’s one vehicle stolen every five minutes. Auto theft costs every driver in Ontario an average of $130 a year: that’s how much of your auto insurance premium goes towards settling claims for stolen vehicles (on average). The increasing prevalence of sophisticated car theft techniques, such as relay attacks on keyless entry systems, has led to a spike in vehicle thefts. According to the Insurance Bureau of Canada (IBC), Canada’s private auto insurers paid out $1.5 billion in theft claims in 2023 – up 254% since 2018.  This marks the second year in a row auto theft claims costs have topped $1 billion. To put this into perspective, between 2018 and 2021, auto theft claims costs averaged $556 million annually.

In Ontario alone, auto theft claims costs increased by 524% between 2018 and 2023, surpassing $1 billion for the first time in 2023. This surge in auto thefts drives up the overall cost of claims, prompting insurers to raise premiums to cover these additional risks. Efforts to curb auto theft, including public awareness campaigns and advanced security measures, are ongoing, but the current trend continues to influence premium rates.

3. *Fraudulent Claims*

Insurance fraud is a significant issue in Ontario, contributing to higher premiums for all drivers. Fraudulent claims, including staged accidents and exaggerated injury reports, cost the insurance industry millions of dollars each year. The Ontario Auto Insurance Anti-Fraud Task Force estimated in 2023 that fraud costs Ontario drivers up to $2 billion annually, which is reflected in higher premiums for everyone.

4. *Regulatory Environment*

Ontario's auto insurance market is highly regulated, with government policies influencing premium rates. Recent changes aimed at protecting consumers, such as reforms to the definition of catastrophic injuries and caps on certain benefits, have had mixed effects. For instance, the 2022 reforms intended to lower premiums by reducing benefits resulted in only a temporary dip in rates, and premiums have since continued to rise. In early 2024, the Financial Services Regulatory Authority of Ontario (FSRA) approved several rate increases for insurers, averaging around 5% compared to 2022.

5.*Increased Litigation*

Litigation costs in Ontario are another factor contributing to rising auto insurance premiums. The province has a complex legal system for handling auto insurance claims, and disputes often lead to lengthy and expensive court battles. Ontario has one of the highest auto insurance-related legal costs in Canada, with a significant portion of premiums going towards legal fees and court costs. From 2020 to 2023, these litigation costs have increased by approximately 15%.

6. *Changes in Driving Patterns*

The COVID-19 pandemic has also affected driving patterns, leading to fluctuations in claims and premiums. Initially, reduced traffic volumes during lockdowns led to fewer accidents and lower claims. However, as restrictions eased and traffic returned to normal levels, the frequency of accidents and claims increased. Data from the Ontario Provincial Police (OPP) indicated a 12% increase in serious collisions in 2023 compared to pre-pandemic levels in 2020.

7.*Economic Factors*

Broader economic factors, such as inflation and supply chain disruptions, also play a role in rising auto insurance premiums. Inflation affects the cost of vehicle repairs and medical treatments, while supply chain issues can lead to delays and increased costs for vehicle parts. These economic pressures force insurers to raise premiums to maintain financial stability. For example, the Consumer Price Index (CPI) for vehicle parts and equipment in Ontario rose by 18% from 2020 to 2023, contributing to higher repair costs.

8. *Vehicle Replacement Costs*

The cost to replace vehicles after total loss accidents has also increased. This is partly due to the rising prices of new cars, driven by both inflation and the integration of advanced technology in vehicles. According to the IBC, the average cost to replace a vehicle in Ontario increased by 15% from 2020 to 2023. These higher replacement costs contribute to the overall increase in claims expenses.

9. *Rising Medical Costs*

Medical costs associated with auto accidents are on the rise. Advances in medical technology and treatments have improved outcomes for accident victims, but they have also increased the cost of care. In Ontario, the cost of medical rehabilitation for accident victims rose by 20% from 2020 to 2023. This increase in medical expenses adds to the overall claims costs, which are then passed on to policyholders in the form of higher premiums.

10. *Increased Administrative Costs*

Insurance companies face rising administrative costs, including those related to regulatory compliance, technology upgrades, and customer service improvements. In 2023, the FSRA introduced new compliance requirements that increased administrative expenses for insurers. Additionally, insurers are investing in digital platforms and cybersecurity measures to enhance customer service and protect against cyber threats, further driving up operational costs.

The rising cost of auto insurance premiums in Ontario is the result of a complex interplay of factors, including increased claims frequency and severity, insurance fraud, regulatory changes, litigation costs, shifting driving patterns, broader economic pressures, rising medical costs, higher vehicle replacement costs, and increased administrative expenses. While efforts are being made to address these issues, it is likely that premiums will continue to rise in the near future. Drivers can mitigate some of these costs by shopping around for the best rates, maintaining a clean driving record, and exploring discounts offered by insurers. At Verdant Insurance, we make it our priority to help our clients navigate through these tough times by ensuring you are getting the best rate with our insuring partners. If you’re interested in seeing what quotes we have available for you, click the button below!