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Car insurance prices rise despite COVID-19 relief measures, according to new report from LowestRates.ca

News provided by LowestRates.ca

TORONTO, Sept. 22, 2020 /CNW/ - The average price of personal auto insurance in Canada climbed in the second quarter of 2020 for most Canadian drivers, even as the COVID-19 pandemic led to a decrease in driving and inspired insurance companies to help customers with a slew of relief measures, according to the Auto Insurance Price Index Report 2020 from leading financial comparison site LowestRates.ca.

A look at prices in Alberta. (CNW Group/LowestRates.ca)
A look at prices in Alberta. (CNW Group/LowestRates.ca)

While prices rose in Alberta and the Atlantic provinces, they fell slightly in Ontario. The good news is that the report finds that many Canadians can save on car insurance by actively updating their driving information and comparing rates online. For some, the savings could amount to hundreds of dollars annually.

"Drivers should ensure their insurance policy accurately reflects their auto usage, which might have dropped significantly during the pandemic and could stay that way as working from home becomes more widespread," said Justin Thouin, CEO of LowestRates.ca. "Drivers can also reconsider the need for comprehensive or collision coverage on older vehicles that might not be worth repairing. But even when insurance rates are rising, shopping for a better deal can pay off."

The Auto Insurance Price Index Report 2020 draws on data from LowestRates.ca's car insurance quoter, which millions of Canadians use each year to compare real-time rates tailored to them. The report focuses on data collected since the start of 2019 from drivers in Alberta, Ontario and the Atlantic provinces, which together account for a majority of Canada's private auto insurance market. The Index was set to 100 in Q1-2019; a one-point change on the Index represents a 1% change from the initial benchmark of 100.

Key highlights from the report:

  • Car insurance prices rose in Alberta and Atlantic Canada, while prices fell in Ontario (year/year)

  • COVID-19 discounts were not enough to offset rising car insurance prices (quarter/quarter)

  • Insurance companies across Canada continue to remain concerned about rising claims costs

  • Distracted driving and more technologically complex cars are leading to rising claims costs

  • Insurance companies also blame government regulation and price caps for higher insurance prices. Insurers say these caps hurt competition and lead to higher prices for consumers


Alberta's skyrocketing prices plateau – but for how long?








One-year premium change, through Q2-2020




Overall

Men

Women

18-24

25-44

45-79

+22.7%

+22.2%

+22.5%

+23.9%

+28.7%

+19.9%

Auto insurance rates in Alberta rose 23% year-over-year on average and by nearly 29% among drivers aged 25 to 44.

That being said, the price increase slowed when looking at the past quarter. Prices were up only 1% in Q2 when compared to Q1. Perhaps sensing growing strain on consumer finances due to COVID and low oil prices, only a few insurers applied to Alberta's insurance regulator for permission to hike rates. Many drivers also entered lower-than-usual mileage or declined optional coverage (such as collision) when requesting quotes through LowestRates.ca, likely a byproduct of driving less due to the COVID-19 lockdown.

Unfortunately, this respite is unlikely to last much longer: claims costs are surging as insurers are only beginning their recovery from years of austere price caps that had previously been imposed by the government.

Ontario rates reverse course – a sign of things to come?

Ontario

One-year premium change, through Q2-2020

Overall

Men

Women

18-24

25-44

45-79

-3.7%

-3.8%

-4.2%

-1.1%

+4.2%

-4.0%

Car insurance prices in Ontario were down about 4% year-over-year, but experienced a 2% quarter-over-quarter increase, which warrants watching.

It's an unwelcome reversal in a province with some of the highest car insurance premiums in the country. As in Alberta, claims costs in Ontario are rising steadily and insurance companies are clawing back from the previous Liberal government's attempt to reduce rates by 15%. Other factors include Ontario's high incidence of insurance fraud and laws allowing certain injured parties to sue for damages, with insurers footing the bill.

COVID itself is suspected of driving up prices in Ontario. Countless commuters abandoned public transit in favour of private transportation, driving up automobile sales and demand for insurance coverage. But drivers with a long break in their car insurance history or no history at all – which accounted for 29.7% of LowestRates.ca users in Q2 – generally pay more for coverage than current or recent drivers.

Ontario drivers should expect insurance rates to remain high for the long term.

"Reducing auto insurance rates in Ontario is going to require systemic change, which the government has promised, but which will require time to carry out," said Thouin. "Until then, there's no indication that the Ford government will impose rate cuts or price caps in the same fashion as its predecessor."

Atlantic Canada rates way up from a year ago despite recent drops

Atlantic Canada





One-year premium change, through Q2-2020



Overall

Men

Women

18-24

25-44

45-79

+14.1%

+17.6%

+5.1%

+20.1%

+19.6%

-2.3%

Residents of Canada's four Atlantic provinces could breathe a sigh of relief after the first six months of 2020. During that period, the average auto insurance price dropped by 8.1% – compared to a 24.2% jump over the last six months of 2019. Year-over-year, prices are up 14%.

Our data suggests that a great number of older drivers getting quotes on LowestRates.ca helped drive prices lower (insurance companies offer lower prices to older and more experienced drivers, since they're viewed as less of a risk to insure). In Q2, the number of LowestRates.ca users aged 45 to 79 grew by 25% compared to the previous quarter, thus driving down the average rate quoted on the site.

Unfortunately for drivers, that downward trend is likely to be short-lived. Government policy has forced insurance companies to charge less for auto coverage than they believe is feasible, which has led to insurers to be more hesitant to do business in these provinces, limiting consumer choice and raising prices in the process.

To read the full report, go to: https://www.lowestrates.ca/blog/auto/auto-insurance-price-index-q2-2020.

Our methodology

The LowestRates Auto Insurance Price Index tracks the average of auto insurance prices. We set the index to 100 in Q1 2019 and use average prices from that quarter to gauge whether prices are moving up or down in relation to it.

About LowestRates.ca
LowestRates.ca is an online rate comparison site for insurance, mortgages, loans and credit card rates in Canada. The free, independent service connects consumers directly with financial institutions and providers from all over North America to offer Canadians a comprehensive list of rates. LowestRates.ca's mission is to help Canadians become more financially literate, and we have saved them over $1 billion in interest and fees.

A look at prices in Ontario. (CNW Group/LowestRates.ca)
A look at prices in Ontario. (CNW Group/LowestRates.ca)
A look at prices in Atlantic Canada. (CNW Group/LowestRates.ca)
A look at prices in Atlantic Canada. (CNW Group/LowestRates.ca)

SOURCE LowestRates.ca


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