High Loss Ratios Keeping Auto Insurance Expensive Across Canada

Prices in Alberta see most severe increases as insurance companies grapple with rising claims costs

Toronto, ON (July 30, 2019) – LowestRates.ca, an online comparison site for personal finance products like insurance, mortgages, loans and credit cards, has released its Q2 2019 Auto Insurance Price Index, which uses proprietary data to track the average cost of car insurance in Canada each quarter.

The report found rates are up across Ontario, Alberta, and Atlantic Canada in the second quarter of 2019, with drivers in Alberta seeing the steepest increase in the country—rates there rose 16.20% in the past year.

In Atlantic Canada, rates have seen the least severe increase, up 13.29%, while in Ontario the average cost of auto insurance is up 13.85%.

“Insurance companies across Canada are fighting high loss ratios,” explains Justin Thouin, CEO and Co-Founder of LowestRates.ca. “We have been hearing from many of our partners that in some areas, they’re paying out more money in claims than they are taking in from premiums. This has led some companies to stop offering new insurance policies, which has led to a drop in competition and higher prices for Canadians.”

The Financial Services Commission of Ontario (FSCO), which regulates insurance rates across Canada, has highlighted several factors that have raised the values of claims nationwide, including distracted driving accidents and the high costs associated with fixing modern cars, which feature a variety of sensors, touch screens and advanced technologies.
Additionally, provincial government caps on insurance pricing have contributed significantly to the high loss ratios being experienced across the industry, particularly in Alberta. “Our Alberta price index has now hit record highs for three straight quarters, and the Insurance Brokers Association of Alberta has publicly said that auto insurance in the province is in crisis,” says Thouin. “They want government intervention to address this unsustainable situation.”

Breakdown in auto insurance price changes by sex:

In Ontario,

• Men are paying 15.17% more than in Q2 2018 and 8.72% more than last quarter;
• Women are paying 9.82% more than in Q2 2018 and 2.66% more than last quarter.

In Alberta,

• Men are paying 17.18% more than in Q2 2018 and 7.47% more than last quarter;
• Women are paying 14.25% more than in Q2 2018 and 6.35% more than last quarter.

In Atlantic Canada,

• Men are paying 13.47% more than in Q2 2018 and 9.02% more than last quarter;
• Women are paying 12.63% more than in Q2 2018 and 4% more than last quarter.

How does the Auto Insurance Price Index Report work?

The index works by looking at the lowest auto insurance rates available on LowestRates.ca each quarter, getting an average and then comparing it to past quarters. The LowestRates.ca Auto Insurance Price Index tracks the percentage change in the average car insurance quote received by individual drivers insuring only one vehicle in either Ontario, Alberta or Atlantic Canada.

A benchmark quarter, in this case Q1 2018, is used to create a baseline (a reading of 100) for the index. Each point on the index above or below 100 represents a roughly 1% change in prices. For instance, a 104 index reading would mean the price has increased by 4% since Q1 2018.

Each market has seen the following increases on LowestRates.ca’s Auto Insurance Price Index:

• Ontario increased from 100 on the index in Q1 2018 to 117 in Q2 2019
• Alberta increased from 100 on the index in Q1 2018 to 119 in Q2 2019
• Atlantic Canada increased from 100 on the index in Q1 2018 to 114 in Q2 2019

Read the full report on the LowestRates.ca blog.

Why do rates increase?

Insurance rate increases are directly related to costs incurred by providers. For instance, if the number of claims rise in a given quarter for one insurer, they’ll increase their premiums, even if other insurers lower their own prices. There are several trends right now that may contribute to these increases, including a higher number of distracted driving accidents, the rising costs of new vehicle repairs and fraud. The LowestRates.ca Auto Insurance Price Index tracks the percentage change in the average quote requested for car insurance by individual drivers residing in Ontario, Alberta and Atlantic Canada, insuring only one vehicle.