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Five Reasons Behind Increase in Car Insurance Rates

by Kim Marks

The elusive nature of automobile insurance costs in Canada might be a matter of concern for you. However, this is a mandatory expense that all car owners need to make.

With car insurance rates increasing in Canada, you might be wondering, “why did my car insurance go up?”.

Well, there’s no transparent formula that would tell you how each insurer calculates the premium each year. At times, the insurers tend to be arbitrary, and you won’t find any concrete pattern when it comes to pricing the policies.

The best way to deal with rising car insurance costs in Canada is to seek professional assistance from an insurance brokerage like Surex.

Reasons behind increasing car insurance rates in Canada

Car owners often wonder, “why did my car insurance go up for no reason?”. In British Columbia, car insurance prices increased by 63% between 2015 and 2024. Currently, insuring your vehicle would cost you more than $1,822 annually in this province.

While different factors determine the car insurance rates, you wouldn’t like to see the insurance costs skyrocketing. It’s time to explore the reasons that might be triggering the spike in these costs.

1. High inflation

In case you are wondering, “why did my car insurance go up in 2024?”, the inflation turns out to be the culprit. The gnawing impact of the ongoing inflation in Canada directly impacts the cost of living.

Source: time.com

Of late, the country has been going through the sharpest inflation in the last four decades. With 8.1% inflation, the cost of automobile parts, repairs, and maintenance has been increasing. Naturally, insurers are aware of these risks and are correspondingly increasing the premiums.

Unfortunately, this trend is likely to continue due to the supply chain disruption following the pandemic.

2. Rising health spending

Car insurers offer more than simply coverage for the vehicles. Most policies cover the drivers and passengers as well. In case of a collision, the policy would cover the occupants’ medical expenses. With health spending steadily rising in Canada, insurers have no option but to hike the premiums. This way, they can factor the rise in health spending into the policies.

The cost of treatment in an emergency room increased by 176% between 2008 and 2017. Five years on, health spending is still on the rise. No wonder why car insurance premiums might be bothering the owners.

3. Expensive car parts

Complicated mechanical systems and expensive car components constitute other reasons that justify rising insurance costs. Moreover, the inception of EVs in the last decade has significantly led to insurers hiking premiums.

Modern cars have more sophisticated safety mechanisms to mitigate physical injury. These technologies actually cost more, and the insurers need to cover the same.

In the past, a slight collision required the owners to fix only a dent. Now, you need to work on the delicate sensors too. Also, you cannot overlook the chance of cars getting totalled. Considering the losses the insurers need to bear, premiums are steadily increasing.

4. Natural disasters raising insurance rates

Source: cnbc.com

Closely observing the financial costs arising from adverse weather conditions and natural disasters in Canada over the last few years, you would realize why insurers are charging more. In 2024, insured damage in Canada from poor weather events amounted to more than $2.1 billion. The flooding in British Columbia in November and the hailstorms in Calgary are two notable events.

As insurers had to bear the burn due to these events, they have been forced to make adjustments by increasing the policy premiums. Climate change, along with other factors, continues to look menacing. So, there’s no respite for car owners from rising insurance costs.

Because of these environmental issues, many insurance companies in Canada and other states across the world have started to offer eco-friendly car insurance policies which offer discounts and other promo deals, thereby saving some money on your insurance rates. These policies often invest in environmental projects, such as planting trees or funding renewable energy research.

For example, if you’re from Australia, particularly in New South Wales, several insurers offer compulsory third party (CTP) insurance or a CTP green slip who have partnered with many environmental experts in making the world a safer and more eco-friendly place. Therefore, if car owners want to reduce their insurance rates and contribute to the planet’s protection, they should look for budget-friendly insurance policies. For more information, they can check out credible websites and online resources like greenslips4earth.com.au and other similar options.

5. Risk assessment strategies

Different insurers follow different strategies while evaluating the risk profile of car owners. The criteria they consider keep changing, and at some point, they might even consider you a high-risk client.

At times, insurers also use different technologies during the process of underwriting. This alters the way they perceive you and the associated risk. Moreover, when the number of accidents increases, insurers need to shell out additional expenses to make up for the losses. Later, they raise each customer’s average insurance premiums to compensate for their loss.

How can you reduce your car insurance costs?

Source: iii.org

Now that you know the answer to the question, “why did my car insurance go up?”, you might want to start looking for practical ways to curtail these expenses. Here are some tactics you can adopt to remain on the affordable end.

  • Under Canadian norms, some coverage for your car is mandatory, such as liability coverage. Check with the insurance experts whether the provincial coverage laws permit you to drop something in case the resale value of your car is low. For instance, if your car is old enough, you can let go of the collision coverage.
  • Be ready to negotiate a deal with the insurers for a more affordable package. Bundling your home and car insurance policies can work in your favour. If you are not comfortable doing so, seek the assistance of insurance experts.
  • Consider increasing your deductible to help lower your insurance premiums, but bear in mind that this means you’ll have to pay more out of pocket if you file a claim.
  • Some cars that come with adequate safety features invite cheaper insurance rates. In case the vehicle has a less powerful engine or high crash-test scores, you can find an affordable insurance package.
  • Maintain a good credit score and drive safely. Drivers with a no-claim history can benefit from several discounts. You can also undergo a motor driving certification course to learn about insurance discounts.
  • Shop around and compare quotes from various companies. This is the easiest and quickest way to see how much you can save in the long run.

By taking these steps, you can reduce your insurance rates and save money each month or year. If you pay a lower insurance rate, you’ll have more money available to cover other expenses. Doing so can contribute to your financial security in the event of unexpected occurrences.


The best way to dodge this price hike is to switch to a different insurer when you observe the rates consistently rising.

Source: kellyleeinsurance.com

Established companies like Surex can help you choose an affordable car insurance policy. With the experts ready to assist you, it would be easier to compare the best deals and settle for something cost-effective that would assure adequate coverage for your vehicle. This way, you can strategically deal with rising insurance costs for cars in Canada.