Understanding Rising Insurance Rates

Catastrophic fires, unprecedented flooding, and wild windstorms have captured headlines across the globe.

Climate change has caused damage in every corner of the world, with Canada being no exception. As more and more home and business owners face costly weather events, insurance companies are seeing more claims being filed and paid.

According to the Insurance Bureau of Canada, in 2018, severe weather led to $1.9 billion in insured losses. As insurance companies look to provide their clients with the coverage they need and deserve, an increase in rates has been necessary to remain viable. In the past, when insurance companies paid out more in claims than they took in with premiums, they could rely on investment portfolios as a buffer. With severe weather events occurring more frequently, returns from investment portfolios can no longer cover the rising claim costs.

The University of Waterloo’s Blair Felmate told The Globe and Mail in September 2019, as weather events become more costly, homeowners find themselves in a position of changing insurance costs. He says it is a phenomenon from Halifax to Victoria, and one of the most significant reasons is our changing climate. In Canada, changing winter weather patterns have led to an increase in flooding. According to Felmate, water damage has overtaken fire to become the top home insurance cost in recent years in part, because of climate change.

You can read the full Globe and Mail article here.

What you can do

In winter months, storms and extreme shifts in temperature can lead to frozen pipes and ice dams, which can cause flooding. Ice dams are created when the snow on your roof melts and accumulates at the roof’s edge, where the temperature is cooler. The ice builds up and blocks water from draining off the roof, causing water to seep down under the roof and into your attic and down the inside walls of your home.

While extreme storms and potential damage cannot be precisely predicted, we can provide many resources to help you prevent flooding caused by these issues. Some easy tips for winter include:

• Turn off your outside tap from the inside and ensure the exterior tap is open
• Use caulking to seal holes and cracks in outside walls and in the foundation near water pipes
• Fit exposed pipes with insulation sleeves
• Keep your attic well ventilated to reduce the chance of ice melting and refreezing
• Ensure your attic floor is well insulated to minimize the amount of heat escaping your home
• If an ice dam forms, call a roofer to have it safely removed

How to keep the price down

If you are looking for a new policy or are buying a new home, keep the following tips in mind to help keep your costs down:

• Working with a broker means they will shop around for you
• Raising your deductible can lower your premiums
• Combining your home and auto insurance often leads to savings
• You may be able to save by taking steps to make your home disaster-resistant, depending on your location
• Some companies offer discounts for home security systems
• Ask about other discounts that may be available, based on age, location, customer loyalty, or credit rating

Unfortunately, changes in price can go beyond your home and property insurance. You may have noticed your auto insurance rates have also increased. Even if you have had no claims, there are several reasons beyond your control that could have led to your premiums rising.

Additional features and computerized components can mean safety but not necessarily savings. While capabilities such as adaptive cruise control, collision alerts, and park assist can keep you and your passengers safe, they also use sophisticated auto computers and sensors that cost more to repair. In fact, according to Consumer Reports, 2017, the cost of an average car repair was $70 in 2007, but by 2014 the cost skyrocketed to $520. The cost to manage and respond to fraudulent activity is also on the rise. Staged accidents are causing rates to increase across the country. In Ontario alone, the Insurance Bureau of Canada reports that the cost of fraud is an estimated $1.6 billion per year or $236 per driver. Other reasons for rising costs include more cases of distracted driving, more expensive medical services, built-in windshield technology, more expensive front and rear sensors and geographical location and trends.

An article published in the Toronto Star in March 2019, states “postal code discrimination” is a significant factor when determining your car insurance rates. Rates in and around the GTA are significantly higher when compared to areas just a couple hours away including Barrie and Waterloo Region. A little relief could be on the way for some, as a provincial private member’s bill has been sent to the Standing Committee for Finance and Economic Affairs for review. Bill 42 would remove geography as one of the primary factors in determining your car insurance rate.

Read the full Toronto Star article here.

As auto insurers look to offset rising costs, the national average for auto insurance has risen. According to J.D. Power Canada, Alberta has the highest auto insurance rates, followed by Ontario.

How you can save

 When it comes to car insurance, most drivers want a policy that doesn’t cut corners, but still fits their budget. Brokers can do the legwork for you and advise on policies that fall within your price range, but here a few things to consider:

• Pick the right make and model
• Drivers above a certain age can receive discounts from most insurers
• Insurers will provide savings for using approved winter tires
• Tell your broker if your habits have changed or if you are driving shorter distances
• Combine your policies

Although some insurance rates are changing in response to climate concerns, computerized cars or even rates of fraud, we can’t predict when and how these rates could change. However, our job as your broker is to find you the coverage you need at a price that is fair by shopping around for you, comparing quotes, and analyzing options. We know there is competition for your home and auto insurance dollars, and we strive to be your best advocate by finding the best rates available to us.