Why Are Insurance Premiums Going Up in 2019?

 In Auto Insurance, Home Insurance, Insurance Tips & Info, News & Updates

In 2019, the insurance industry has seen increases in home and auto insurance premiums from many insurance providers. These changes are being driven by the new ‘hard market’, which the Canadian insurance industry has been moving towards since 2018.

The current hard market is caused by a variety of factors, from the rising costs of auto repairs to the growing frequency of severe weather events. These factors are increasing the risks taken on by insurance companies when they sell home or auto policies, and this is leading to a rise in premiums.

At The Ostic Group, we are in a unique position to help customers navigate the challenges of a hard market. Our strong relationships with a wide variety of insurance providers give you more choice when it comes to insurance products, and our brokers can help you find the best rates for your situation.

Click here to learn more about how we can help.

What is a ‘hard market’?

In the insurance industry, a ‘hard market’ is a time when insurers are paying out more in insurance claims than would be typical.

A hard market will force the industry as a whole to raise insurance rates, in order to ensure they can stay profitable in order to support clients and payout claims going forward. It may also lead to restricted coverage on select policies and more stringent underwriting practices from some companies.

What is causing insurance premiums to rise?

In Ontario, our insurance premiums are currently being driven up by a variety of factors, which are affecting both home and auto insurance policies. These factors range from new technology in our vehicles to the widespread effects of climate change on local weather patterns.

In this article, we’ll review some of the key issues that are impacting insurance markets in Ontario in 2019:

Mechanic uses diagnostic device to do auto repairs on a new carCost of Auto Repairs

The biggest cause of higher auto insurance rates in 2019 is the increasing cost of auto repairs. Auto repairs are becoming more expensive, for both vehicle owners and insurers, due to the extent of technology installed in newer vehicles.

A typical auto repair job has become far more complex than even a few years ago, which has led to an increase in labour hours required for repairs. For example, in 2018, the average auto repair job took a full hour longer than the previous year.

As a result, the costs of auto repairs have begun to exceed the increase in rates approved by local regulators in Ontario — this has created a situation where auto insurance claims are beginning to exceed the amount collected in premiums.

Distracted Driving

Another factor contributing to the rise in auto insurance rates is the increasing number of claims related to distracted driving.

From 2016 to 2018, the number of distracted driving-related accidents across Canada increased by 23% — and Ontario saw an increase of 12% over the same time period. Distracted driving is the leading cause of 8 out of 10 accidents, which means that it is driving up the number of overall auto insurance claims nationwide.

Fraudulent Claims

Fraudulent claims are also playing a major role in the change, for auto insurance premiums in particular. 

One study showed that $1.6 billion was paid out to fraudulent claims in a single year, which meant that almost $250 out of every driver’s auto insurance premiums was going towards paying for the illegal activity of fraudsters.

Severe Weather Events

Fallen branch on road as a result of a severe weather event in Ontario

When it comes to home insurance, one of the biggest factors contributing to the increase in insurance premiums is extreme weather. As we’ve seen over the past few years, climate change has significantly increased the frequency of severe weather events, such as floods, wildfires, ice storms, windstorms, and more.

In 2018, severe weather caused over $1.9 billion in damage, and many of these events impacted Ontario. Here were some of the main offenders:

  • Early May windstorms caused $410 million in damage across Ontario and Quebec.
  • Mid-September tornadoes and windstorms caused $295 million in the Ottawa-Gatineau area.
  • A mid-April ice storm caused $190 million in damage in Southern Ontario.

These are just a few of the biggest examples from a year filled with severe weather.

High Housing Costs

Over the past few years, housing prices have risen rapidly across Ontario, especially in communities surrounding the GTA. Although 2018 prices have plateaued somewhat, thanks to mortgage stress testing and other measures, prices are still forecasted to rise in 2019.

Higher housing costs typically lead to an increase in the size of the insurance claim when something is damaged. As a result, they increase the risk taken on by insurers — a risk that is heightened by the frequency of severe weather events in recent years

More Finished Basements

Along with rising housing costs, there is a growing trend towards homeowners building finished basements in their homes. Whether these basements are used as rental apartments to generate supplemental income or recreational space for a growing family, they represent an increase in potential insurance claims.

A finished basement will be especially vulnerable to damage from sewer back-ups or flooding, in the case of severe weather. Many basements also include expensive electronics, such as home entertainment systems, which are costly to replace.

How we can help in a ‘hard market’

As insurance brokers, The Ostic Group is in a unique position to help customers navigate the challenges of a hard market. Here’s how we can help you:

We offer you more choice

At The Ostic Group, we pride ourselves on having one of the largest rosters of insurance providers in Ontario.

Our team works hard to build relationships with different providers across the province, so we understand the unique benefits of each provider and the nuances of their various policies.

With so many options to choose from, it becomes easier for us to match you with the policy that will provide the best value for your current situation.

We ensure that you are getting the best rates

Modern insurance rates are based on a larger number of variables than in the past, which means that information has become key. Remember that, as a broker, we work for you — not the insurance providers.

The more information that you can provide us with, the better we can help. Different insurers handle risks in different ways, and even a small change in your employment, your vehicle, or your living situation may lead to savings in insurance premiums.

For example, commuting used to lead to higher auto insurance rates, but today it can actually lower rates with some providers. Make sure that you aren’t overlooking something that you perceive as a risk — because it might help you save in the long-term

If you want to ensure that you are getting the best insurance rates for your situation, talk to one of our brokers today.

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Showing 2 comments
  • Vince P. Mayne
    Reply

    Reviewed the explanation for increase in Auto/Home Insurance.

    The only useful piece of information I could extract relates to home insurance. The insurance company claims that when houses flood in Bracebridge and other parts of cottage country, I pay higher premiums in Centre Wellington.

    Car insurers charge higher premiums for policyholders in certain areas of Ontario where theft is high.

    Why don’t the Insurance Companies do the same for house insurance?

    I want to buy insurance that reflects the environmental risks where I live and really don’t care about a Toronto resident who can afford a cottage in an area that frequently floods.

    • TheOsticGroup
      Reply

      Hi Vince,

      Thanks for your comment! We’ll do our best to provide an explanation.

      To answer your initial question, insurance companies will charge different premiums depending on the specific circumstances of the home in question (i.e. area with high flood risk). However, big disasters like province-wide flooding will also have an impact on the reinsuring companies that actually insure the insurance companies (a second tier of coverage known as reinsurance).

      These type of large catastrophic losses will force the reinsurance companies to increase their premiums to help cover the property and casualty insurance for companies in North America, which will then be passed down to the consumer. Even losses in the US can have an impact on the average Canadian. The whole insurance industry is interconnected, so major disasters can have a ripple effect, even to places where you wouldn’t expect it.

      Hope that helps to address the situation in more detail.

      Best regards,
      The Ostic Team

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