Car Insurance Rates Are Skyrocketing
Car insurance is going through the roof. So why is this happening and how can you save money? That’s what we’re going to find out.
Car insurance is getting wildly expensive across North America according to new consumer price index data.
The average cost of car insurance spiked 26% in 2024 compared to the previous year and is now averaging over $2,500 annually.
In Canada Insurance rates are already up around 13% across the board for provinces with private insurance according to rate hub data and some experts predict that rates could go up by around 20% by the end of the year and even higher next year.
So we’ll get into what’s causing these massive insurance increases and what you can do to reduce your insurance premiums.
Why Are Insurance Premiums Rising So Rapidly?
Well, quite simply, insurance companies are paying out a lot more in claims than ever before.
And as payouts increase, insurance companies passed down those costs onto consumers.
Now there are several driving factors behind this rapid increase in claims and payouts and one of the biggest ones is auto theft.
It is no secret that auto theft has skyrocketed over the past few years.
According to nhtsa, auto theft has increased by 25% across the US over the past few years to the point where a vehicle is stolen every 30 seconds.
Auto theft has risen even faster In Canada where theft claims have increased by 56% over the past five years, the annual cost of auto theft to Americans is over $8 billion and it’s now over 1.5 billion in Canada.
A staggering 254% increase according to data from the insurance Bureau.
vehicles that are more likely to be stolen are also more likely to have higher insurance premiums.
But it’s not just those who have their vehicles stolen that are victims, unfortunately we all pay the price as a result of auto theft from settling insurance claims to law enforcement, to court resources and general economic costs.
When Thief Steel, we all pay the price.
Rising Cost and Complexity of Vehicle Repairs
Now after auto theft, the next major driving factor behind increasing insurance premiums is the cost and the complexity of vehicle repairs.
Vehicles are not only getting more expensive to purchase but also more expensive to repair when involved in collisions.
Modern vehicles are more complicated and difficult to work on, which drives up labor costs.
They’re filled with more technology including more cameras, sensors, and other electronics, which adds the repair costs.
Sadly, it’s now common for relatively minor to moderate damage from a collision to rack up an enormous five figure repair bill.
And this is true of almost every type of vehicle.
And not only do insurance companies have to pay more money to repair vehicles, but because of parts shortages and repairs taking a lot longer to complete.
In general, insurance companies also have to pay out a lot more money due to loss of use, such as paying for rental cars.
So because insurance companies are paying, are paying out longer on loss of use and the parts are more expensive, five years ago it could be, 750 to a thousand dollars to repair a bunker because of technology in vehicles today it is not 750,
it’s 3000, it’s 4,000 depending on the type of model the vehicle might be written off in that case. certain vehicles of, the electric vehicles, for example, a Tesla,
if the battery gets damaged, it’s a complete write-off ’cause it’s $40,000 to replace that battery.
These are things because technology is getting more advanced, repairs are getting more expensive, rates are gonna go up, that money has to come from somewhere.
Role of Insurance Fraud in Premium Hikes
Another major contributing factor to sky high insurance premiums is insurance fraud like auto theft insurance, fraud, cost insurance companies an enormous amount of money every single year.
Insurance fraud comes in many forms including staged collisions, cyber attacks, and individuals who take advantage of insurance companies and just in general taking advantage of the entire insurance system.
Accident Rates on the Rise
Other examples of fraud are ,in fraudulent claims.
These staged accidents, those are still occurring putting in for more accident benefits than what you should actually, what you would actually qualify for.
Asking for more accident benefits than what you actually qualify for is another problem and that usually puts up red flags.
Now, traditionally, and this is something I’ve been arguing with insurance companies for a very long time, is that they would just pay the claim, pay the claim, pay the claims.
They can’t do that anymore. That’s unsustainable.
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So now each insurance company has developed a fraud squad and they are looking very closely at these claims.
So when you have a claim, even if it’s legitimate, you may be asked a lot of questions to substantiate that claim.
So these people that are committing those, that fraud, that misrepresentation, they’re making it difficult for everybody because the insurance companies have been burned so often and I know you’re probably gonna yourself, she thinks poor insurance companies. It’s not that. It’s that, that we all pay for it.
Eventually, all of these costs get passed down from insurance companies to all of us in the form of increased insurance premiums.
And on top of all of this, accident rates do seem to be going up in the US where nitsa reports that accident fatalities are up significantly when compared to a few years ago.
This could be due to a number of factors including distracted driving with cell phone use while driving increasingly complicated vehicle touchscreens vehicles getting bigger and heavier.
And of course impaired driving plays a role too.
Ultimately, all of these contributing factors are what insurance companies use to justify increasing your insurance premiums.
How to Reduce Your Insurance Premiums
So what can you do about it and what can you do to help reduce your insurance rates?
Now, what can you do to reduce your insurance premiums?
so first things first. Always try and package your home and auto together or your property in auto.
If you’re renting, you should have tenants insurance. So and definitely purchase that.
It can bring down your auto insurance by 15%.
Check what type of discounts your insurance companies offer for any loss mitigation or anti theft mitigation devices or programs like TAG or immobilizers or steering wheel locks if they offer any discounts there.
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Always check your policy to see that you’re being rated correctly. the rating variables, have changed since covid, so you might wanna update that.
Always shop around and check because from company to company, as I said before, I have a list of 18 companies with 18 different ways that they’re dealing with auto theft.
If you have one of those targeted vehicles, you could be being surcharged anywhere from 500 to $1,500.
So check around and see what other companies are offering when it comes to that.
There’s no question. Every consumer needs to use every tool at their disposal to help reduce their insurance premiums.
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And if you’re not sure how to do that, make sure to consult with an insurance expert such as an insurance broker to help you out.
Now, it seems to me that regardless of the circumstances, there is this feeling that insurance companies are always eventually finding ways to slowly or rapidly increase insurance premiums even during times when they’re saving money and not paying out a lot of money in claims, such as during the early days of the pandemic when hardly anybody was driving.
Did all those savings get passed down to all of us? Well, it didn’t really seem likely or at least not by a meaningful amount.
And now we’ve reached the point where insurance companies are paying a ton of money in claims due to all the different issues.
Insurance premiums are going up and consumers desperately need relief.
Do We Need Major Changes to the Insurance System?
What can be done about this and do we need to see major change to the entire insurance system?
In Ontario, many of the provinces that have private insurance, it’s highly regulated.
Should we have a new product? I absolutely believe so. Our product is set up to be taken advantage of, unfortunately.
So if we could reduce the amount of lawsuits, first and foremost, 90% of the lawsuits that are going through are completely unnecessary.
Ontario has a very robust accident benefit schedule for, to help people when they’re injured in an auto accident.
Unfortunately, it gets abused people are, you know, taking longer to heal or saying they’re taking longer to heal.
You’re not allowed to sue unless you were the person was a hundred percent at fault that hit you.
That’s who you can sue and you were seriously injured. We’re seeing lawsuits for scratches on bumpers.
And get rid of the personal injury lawyers when it comes to auto claims.
if we got, if we take away that, that’s gonna remove most of the most of the claims, right? Most of the lawsuits because most of them are completely invalid.
If the Ontario plan was working the way it’s supposed to, we would not be paying as much. Unfortunately, people find ways around it to abuse it.
So it shouldn’t be cash for care, right? it should be. You’re legitimately injured. Get, we need to get you back to the place you were prior to the loss.
We need to make you, well, let’s use the resources there instead of using up court resources for ridiculous unmerited claims that would solve our problems.
So will reducing auto theft insurance fraud and all the frivolous lawsuits be enough to help bring down insurance premiums? Or do we need to see bigger change to the insurance system? Let me know in the comments.