6 February 2023

Why are my premiums going up? I haven’t had any claims…..

As a broker, we do our utmost to obtain the best possible premiums with the best possible coverage for all of our clients based on their profiles and risk factors. Insurance is the one product you buy, and it’s a significant portion of a household budget, that you never want to use. But insurance is a pool; premiums come in and are used to pay claims. When there are more claims than premiums, premiums increase. Unfortunately, climate change, supply chain disruptions and labour shortages increase the cost of claims. When claim costs increase, so do premiums.

According to Canadian Underwriter, severe weather events in Canada in 2022 is the third worst year for insured damage in our history. There were several events worth noting;

•  $1 Billion, May 21, derecho in Ontario and Quebec
  
•  $800 million, September 23-24, Hurricane Fiona
  
•  $300 million, July – August, Summer storms in western Canada
  
•  $180 million, December 22-26 bomb cyclone in eastern Canada (this figure will increase once all claims are settled)
  
•  $140 million, Feb 17-19 winter storm in eastern Canada
  
•  $80 million, December 22-27, British Columbia winter storm and king tide
  
•  $60 million, April 22-26, flooding in Manitoba and northwestern Ontario
  
•  $50 million, June 16-17 severe storms in Ontario and Quebec
  

These claims have affected both automobile and property rates, and this is just taking into account $3.1 Billion in storm damage. Construction costs have increased dramatically due to the rise in material costs. Labour shortages also increase costs because employers have to increase wages to retain employees. Those increases are passed down to the consumer.

This does not take into account the rising costs of vehicle repairs and rental car duration costs.

Supply chain disruptions reduce the availability of parts which in turn increases the time it takes to repair a vehicle which in turn increases the rental car expenditure. It also increases the instance of theft since thieves are receiving top dollar for needed parts. New vehicles are not readily available so total theft is on the rise to meet the demand overseas.

All of these factors impact the premiums we all pay for insurance. So how do you reduce your premium?

•  Combining your property with your automobile insurance
  
•  Increasing your deductible on your property insurance
  
•  Ensuring that all information is accurate on your policy
  
•  Take advantage of telematics programs offered by automobile insurance carriers. Good driving behaviours = savings
  
•  Drive safely and be aware of others on the road, be courteous and avoid collisions
  
•  Be mindful of traffic laws. Having just one conviction can increase your premium by as much as 20%
  
•  Talk to your broker about ways to reduce your premium without sacrificing coverage
  
•  Reduce your exposure to losses; clean your eaves troughs, clear snow and ice from your driveway and your vehicle, don’t drive in a storm, fix the leaky toilet or faucet before it becomes a bigger issue. Property maintenance goes a long way in reducing losses which will reduce premiums over time.
  

In the end, you still need proper coverage to protect you in the event of a loss. Reducing coverage is generally not the most economic or practical method of reducing premium. Saving a few dollars by removing or reducing a coverage will inevitably cost you more in the event of a loss. Understanding why premiums increase may reduce some of the frustration we all feel when everything is costing more.

Debbie Arnold, R.I.B. (ON) C.A.I.B.
Business Development Manager, Personal Lines