Why are Insurance Rates on the Rise?
By Terry Gillis
Customers across Canada are opening renewals to find their premiums have increased substantially, even model clients with no claims! What has changed?
The big issue is weather. Canada is reported to be warming at twice the global rate and unfortunately the resultant changes in climate have hit our industry hard. Claims due to multiple extreme weather events have skyrocketed over the past couple of years for both home and auto. Renewal premiums are being affected.
The Insurance Bureau of Canada reported that during 2018 insured weather related claims amounted to 1.9 billion! Only a decade ago this was at $400 million a year—a substantial increase with no solution in sight. Insurance companies must position themselves for this new reality. With the trends in weather patterns, ratemaking by companies must ensure that enough premium is shared by all policy holders to put those impacted back into their homes or vehicles following a devastating loss. We never know who could be affected next!
Why does it cost so much to put people back into their homes?
Here are three reasons.
#1 Homes are often being built today with high end cabinets, windows, appliances, heating systems, and other features, that cost more to replace. Building materials continue to rise with inflation, even in the most basic of homes. Your tax bill might show your home is worth $150,000, but the rebuild is often much higher, especially when an area has been hard hit by weather related incidents. Emergency repairs and services are much more expensive.
#2 Trends in home design have changed with basements regularly being finished with expensive electronics and furniture or even home businesses. These are being hit by water damage from aging infrastructure and sewer backup claims, and growing neighborhoods being built up in flood zones.
#3 When you think of Maritime households, there is a strong desire to build on a lake, river, brook, or near the coast. These homes suffer extensive damage when incidents occur such as spring melts along the St. John River or windstorms off the Atlantic. The loss of personal belongings is huge and insurable losses are extensive.
Why are auto premiums also increasing so much, even for those that have had no claims or convictions?
Here are six factors.
#1 The technology within vehicles is ever changing and much more costly to repair. For example, in many new vehicles, advanced driver assistance systems in windows have increased comprehensive payouts. Bumper sensors, park assist, and other complex computer systems are extremely costly to replace.
#2 Distracted driving claims are on the rise, including the use of hand held devices.
#3 The cost of medical services such as physio continues to rise following injuries.
#4 Fraudulent claims and thefts cost Canadian insurers over a billion dollars each year.
#5 Weather related road conditions, flooding, ice storms, have each impacted claims frequency.
#6 Legal fees continue to rise for defending bodily injury and other liability losses.
We want to protect hard-earned home and possessions in the event of a loss. We do not want to see any Canadians suffer from financial ruin due to circumstances beyond their control!