Understanding Car Insurance Premiums

By Chris Coniglio

So you received your car insurance renewal and the price has gone up – for no reason! Right?  Well there are a few reasons.  Most of the reasons come from factors within the insurance industry and often not directly because of you.  Insurance industry actuaries refer to rate increases as “rate adequacy”.  In our opinion this sounds complicated.  This is because insurance is a complex subject and rightfully so.  The insurance industry is a major part of our economy and is responsible for our well being.  As a broker it’s our job to help demystify how it all works.  Our job is to help you and answer the simple question “Why did my car insurance go up?”  Well, we have designed this article to help answer the question.  While it’s commonly known that your premiums may increase as a consequence of your driving behavior, it is also less known why they increase when you have a clean record.

How an insurance rate increase is affected by you:

  • If you are involved in an AT-FAULT collision, this will affect your insurance rates. You will see a rate increase as a result of making an at-fault claim.
  • You received traffic tickets or similar violations. These are a direct consequence of unsafe driving and you’re unquestionably wrong.  The more severe the ticket/violation, the higher your rates will go.
  • Your license has been suspended – if your license is suspended due to a traffic violation, it will have a large impact on your premium.  However, if it has been suspended for administrative reasons ie. Medical, it should not affect your premium.
  • These are some of the main reasons.  However, there are many factors and each insurance policy is different.  Connect with a Highcourt Breckles Insurance Broker for a detailed review of your policy.  We’re happy to help.

 

How an insurance rate increase is affected without you in the equation:

Sometimes, your premium increases, and you have realized you’ve done nothing wrong.  If you are curious or frustrated as to why you are paying more money, we are going to explain what is causing rates to increase.

  • New cars have higher repair costs – old cars were cheaper to repair, so claims were lower, and as a result rates were lower. Now due to the heightened repair costs insurance companies have to pay, rates need to increase as well.
  • Bad drivers are on the rise – With distracted driving rates higher than they have ever been, not only is the number of claims increasing, but the damage resulting from these collisions is as well.
  • The car insurance fraud scheme – Currently insurance fraud is a huge problem, and is toppling the entire industry. According to the Insurance Bureau of Canada, insurance fraud from auto alone costs drivers 1.6 billion per year.  – This equates to $236 per driver.
  • Medical services are becoming more expensive – As the number of claims increases, the number of people requiring healthcare increases, and not only that, but in addition, the costs of medical services such as physiotherapy have increased overall. Appointments cost more today than they would have in the past, and insurance companies have to factor all this information into their premiums
  • Trends in your area show increased risks- Insurance premiums are also affected by statistics, and insurance companies use this when deciding their premiums. If you are at heightened risk of having an accident, the insurance costs will increase as a result.

To conclude, although there are many factors outside your control that cause an increase to your rates, you can limit the amount you pay by taking advantage of discounts, and increasing your deductible.

Visit the Insurance Bureau of Canada to understand more about car insurance:

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