The Changing Insurance Market
With the new year and new insurance rates we have heard across the industry that the overall cost of insurance has increased, and for some the increase has been quite drastic. While we all expect everything to increase over time, seeing a large increase can be worrying for everyone. Below are a few reasons for the increases and some options for you to lower your insurance rates.
Increased Technology: The biggest reason for the increase in car insurance is due to the technology that is in today's modern vehicles. From backup sensors, cameras, lane
detection, automated braking etc, today's vehicles have a lot more technology. While these features have increased safety they have come at a cost. The overall cost of repairing a vehicle after an accident has increased drastically, as sensors now need to be replaced and re-calibrated after an accident. A minor fender bender from ten years ago would typically involve a repair shop just replacing and repainting the bumper of the vehicle and the cost would be roughly $500 - $1000.
Today's vehicles require the repair shop to replace the bumper, replace and re-calibrate the sensors, and testing the safety features to ensure they are working correctly. This adds additional cost for parts (sensors, wires etc), and labor, which can increase the average minor claim to over $5,000. A very similar story is told from replacing the windshield, with new technology being placed inside the glass or to work only with a special type of glass. Many windshield replacements from a few years ago would cost less than $500, but with all the new features some windshields are over $2,000. In a microscope these increases do not seem extreme, but when they are multiplied by thousands of claims it increases the cost of insurance for all companies.
Distracted Driving: Another reason for the increase in auto insurance is what is called the new impaired driving - distracted driving. As a society we are attached to our phones, constantly using them even while we are driving. This has led to an increase of accidents, especially severe ones as many accidents occur from split second decisions. The Ontario government and insurance companies are attempting to curb this trend by increasing deterrents to distracted driving.
Fraud: The last major reason for increases in auto insurance is fraud. Even with all the sensors, cameras and technology insurance companies are very susceptible to fraud as they have a responsibility to get you back into your vehicle as soon as possible. If you wish to find more about fraud and the overall cost to all drivers please click this link https://www.aviva.ca/en/fightfraud/, where Aviva Insurance did an in depth investigation for the cost of insurance fraud in Canada.
Climate Change: The biggest driver of increases on home insurance is the increase in weather events we have experienced in the past few years combined with growing cities. Across Canada we have all seen the large events from the Fort McMurray wildfire, to the flooding in Toronto or Barrie, or the large windstorm that swept across Ontario last year. These events used to happen once or twice every century are now happening on a regular occurrence.
Flooding has slowly replaced fire as the most common claim seen in insurance. A lot has to do with the changing weather we are experiencing, including the larger storms, but part of it has to do with our ever growing cities. Flood plans and wetlands are being replaced by houses, condos, malls, offices etc. Unfortunately all the water has to go somewhere, and it tends to find its way through, around or above foundations no matter how well constructed they are. This has lead to an unprecedented amount of flooding in the past few years. Ten years ago insurance companies would not typically insure flooding on your home insurance policy, but today it is standard across most companies unless you specifically ask for it not to be included, or are in a high risk area.
When these large events occur contractors are often overwhelmed and unable to fix or prevent further damage from occurring. This leads to increased costs and longer construction time to fix the damage.
Changing Building Code - Another factor is the changing building code. Over the long term updating the building code helps everyone making homes safer, but it does increase the cost to rebuild a home. Combined with the increased cost of labor, materials, permits, fees, architects, engineers, equipment etc, the average cost to rebuild a home has increased significantly. This is compounded by the fact insurers do not have the luxury of taking months to plan a renovation or rebuild, as they have the responsibility to put you back in your home as soon as possible.
Municipal infrastructure is getting older. Outdated municipal infrastructure and a higher demand for water make sewer backups more frequent, resulting in more damage-related claims.
Finished basements need more coverage. Basements today are often finished with the same quality as the rest of the home which cost more to repair if there’s a sewer backup or other damage compared to more traditional basements.
Options to reduce your cost of insurance:
Now that you have a little background on why insurance costs are increasing here are a few things you can do to reduce your costs:
1) Bundle your insurance together - most insurance companies will give you a discount of 10 - 15% if you place your policies with the same company.
2) Install a sump pump, back flow valve and an automatic sensor
3) Don't speed or get a ticket - companies typically remove a discount if you have a ticket on your record.
4) Have a higher deductible. Choosing to pay a higher deductible in the event of a claim will reduce the premiums you pay.
5) Secure the perimeter. Or at least install a company-monitored or self-monitored home security system to ward off break-ins
6) Ask your insurer for a quote before making a purchase such as a house or a car - it can make a large difference on your premium.
If you have any questions regarding your insurance please do not hesitate to call us 905-623-4406 and our experienced brokers would be happy to help you with your insurance needs.