Why Do Car Insurance Rates Go Up?

  • Rates Go Up

The majority of vehicle drivers have expectations. They often expect that the cost of their insurance is going to decrease each year. For many, they face disappointment when they get their policy renewal. They find that the rates have gone up. The first question that comes to mind is why? There can be many reasons why this has happened.

How The Insured Has Contributed To The Rate Increase

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Some think that every year that their insurance costs are going to stay the same. When it comes time for renewal, the insurance company is going to do a review of the insured. The main factor that is considered is if there have been any changes in what the driving history shows.

The Driving History

There is a lot of information that is found in the driving history. It is going to include any accidents that may have occurred. It may be no matter whether they are minor or major. Plus, many of the driving infractions will also show. That is if there have been any infractions. The insurance company will study all these issues. How they consider them will depend on many factors. If there has only been one minor accident, for example, it may not have any effect on the increase. But if there have been several even of a minor nature, then it most likely will have an impact. If there has been a major accident, it also could affect an increase in premiums. It will depend on who was at fault.

There are rules and regulations in place in Ontario. For example, there is some that deal with the increase in premiums. Outside of this, the various companies will set their policies. It will be to dictate when premium increases are necessary. Many drivers don’t realize the impact that their driving history has on their premiums.  It can have an effect on the premiums for the future.  They often focus on these just at the time they are getting their insurance.

It is for this reason that drivers should always focus on maintaining a clean driving record. That is if they want to enjoy a decrease in premiums. Or at least they want them to stay the same.

Changes In Circumstances

There can be a lot of changes that take place throughout the year. Changes that could change the premiums for the insurance. Some individuals decide to change vehicles. The type of vehicle they have could play a significant factor in how much the insurance will escalate. The type of vehicle is something that insurance companies take into strong consideration.

Then there are those that want to add other drivers to their policy. It can play a huge role in what the policy coverage will cost. It is going to depend on that particular driver’s driving history as well. If they have a bad history or one that is less than perfect it is going to affect the premiums.

Something as simple as moving to another location can be a factor. A lot of people don’t realize that their premiums are partly based on where the car is. Another circumstance that is taken into account is if the use of the vehicle is going to change. Some individuals take on new employment. They may have to use their vehicle as part of their business activity. It can have a dramatic effect on the premiums. It may now be commercial rather than personal insurance.

Why Insurance Companies Raise Their Rates

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Insurance companies are a business. They are in the business of making money. To do this, they have to determine what their risks of insuring people are. In part, they will rely on statistics to help them determine this. Driving statistics for any specific area can change. If so it is going to have an impact on the insurance rates.

Insurance rates differ across Canada. Some provinces are more expensive than others. For example, Ontario is a province with high insurance rates. Insurance companies cannot just raise the rates arbitrarily. They have to have permission to do so.  It is the permission that comes from the financial services commission of Ontario. Once these rates are increased, then they will apply to all the renewable policies. All those that are going forward through the approval process.

Increase in Expenses

As with any business insurance companies have an increase in expenses on a yearly basis. They have to factor these costs in. They play a roll in determining what they will be charging for insurance. It is the insurance premiums that builds up their profit level.  Building the profit level is one priority.  Being able to keep their claims down is what sets the foundation for them having a viable business.

The Number Of Claims

Every insurance company experiences their own number of claims. These are claims that they have to deal with.  Some companies get hit with a large number of claims. When they do, they have to look at the cost factors involved. They have to do some financial accounting to get things back in balance. One of the ways that they may have to do this is by increasing the cost of their insurance products.

Fraud

Fraud is a major concern with any insurance company. It happens more often than what the average insured individual realizes. The cost of fraud is something that affects everyone. Across-the-board it can create an increase in premiums. It creates an unfair playing field. As it pertains to the individuals that do not take part in this activity. But it is a cost to the insurance companies. And it is a cost that is going to trickle down to the clients in general.

The Importance Of Shopping Around

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Canadians have a great opportunity to be able to buy insurance products. They can do this from many different insurance companies. It comes with the responsibility of being proactive. Being active in the shopping adventure for the vehicle insurance. There are great resources for being able to do this like obtaining quotes. Using these quotes to do insurance comparisons helps the insurance shopper. They can become more informed. It helps them to know what is available to them.

Armed with this information they can then choose the Insurance Company. They can focus on packages that are best suited to them. It isn’t always about what the actual cost of the insurance is going to be.  The benefits and options are an essential part of the insurance.

Resources

https://www.cooperators.ca/en/Answer-Centre/why-do-premiums-change/what-drives-your-auto-insurance.asp
https://www.thelawyersdaily.ca/articles/5393/ontario-unveils-new-automobile-insurance-plan-aimed-at-reducing-costs-fraud