Reasons For Increasing Auto Insurance Rates This Year
Reasons For Increasing Auto Insurance Rates This Year
After a two-year decline, auto insurance rates have begun to rise once more. An increase in inflation has driven up insurance rates, and you may be surprised to find out that the pandemic has also contributed to higher rates today.
Changes in insurance premiums post-pandemic
Changes in insurance premiums post-pandemic
The Financial Services Regulatory Authority of Ontario (FSRA) reports that in 2020 the industry average for premium reductions was 7.1%. During COVID-19, insurance companies assisted customers by providing rebates, freezing premium increases at renewal, or lowering premiums.
Post-pandemic, As we continue to strive for a “new normal,” our old driving habits are starting to resurface, which raises the cost of auto insurance. When more people hit the road for their commute or leisure trips, the chances of collision increase. It leads to the filing of more claims. When insurance companies have to pay out more claims, they have to recoup the loss by increasing insurance rates.
Effect of inflation on the auto insurance premium
Effect of inflation on the auto insurance premium
The inflation rate hit 8.1% in June, this year, resulting in an increase in repair and replacement costs of cars.
The global supply chain issue for semiconductor chips has adversely affected auto repair costs. If your car crashes, you can expect to pay more for repairs as the cost of spare parts has increased by 5.5.%
Also, due to a shortage of labour and spare parts, it takes longer for auto shops to complete the repair. As a result, your car stays in the garage for an extended period, and you have to use a rental car during that time. Let’s say your insurance covers the full cost of your rental car or reimburses you for some part of it. Your insurance rates will go up as a result of all these costs adding up to the claim costs. As mentioned before claim costs are also taken into consideration when determining your insurance premium, due to inflation, the rise in claim cost would also increase auto insurance rates.
However, you will not see the rise in insurance costs right away. Insurance companies will not change your rates in the mid-policy. You will see the change at the time of renewal. This will allow you to shop around and compare rates from different insurance providers before renewing your policy. You may contact PrimeService brokers to get professional guidance.
By Nirali Patel
