Owning and insuring a vehicle costlier since 2020

A comprehensive and detailed new report from Statistics Canada puts Consumer Price Index (CPI) figures to the trends being witnessed in the automobile insurance industry, providing new aggregate and provincial information about the factors causing premiums to rise across the country.

Looking at the passenger vehicle insurance premium’s contribution to the CPI, the statistics agency has concluded that auto insurance premiums increased most notably in 2019 and in 2024 when compared to the previous 10 years, reaching a peak year-over-year increase of 9.6 per cent in July and September 2024.

From December 2019 to December 2024, the median price for a new vehicle increased 61.5 per cent while used vehicles jumped 82.2 per cent. Substantial increases in the cost per claim, driven by increasingly expensive parts and services, is noted as another factor contributing to higher premiums.

They say claims ratios have increased, by Statistics Canada’s measure surpassing 81.2 per cent in the first quarter of 2023, peaking at 90.4 per cent in the third quarter of 2024. This claims ratio began trending upwards in the third quarter of 2022.

“Insurers attributed higher claims costs to extreme weather events during this period, alongside standard factors. In 2024, theft was identified as an additional contributor,” Statistics Canada’s researchers write in the publication, Study: Impacts of rising costs and claims on personal automobile insurance profitability and consumers in Canada, January 2020 to December 2024.

The report also looks at the net insurance service ratio, or NISR, a performance indicator similar to claims and combined ratios, but which they say yields moderately different results. “The NISR surpassed 80 per cent in nearly all quarters and provinces and exceeded 95 per cent in several quarters. According to the industry, a NISR above 80 per cent indicates unprofitability,” they warn.

Auto theft jumps 317 per cent  

Thefts also increased sharply in 2023, surpassing $1.5-billion, up from $489-million in 2019 (a 317 per cent increase) impacting Ontario the most.

They say across Canada, auto theft frequency increased 27 per cent from 2020 to 2023. “Ontario was impacted most significantly during this period, with an increase of 75 per cent, while there was an increase of 23 per cent for Quebec, an increase of 18 per cent for the Atlantic provinces and a decrease of four per cent for the west,” they write.

Until 2023, claims reached 50,000 claims per year. “As of the first half of 2024, auto theft has decreased by 17 per cent, compared with the first half of 2023. Quebec experienced the most significant decline.

The report also discusses the effect of extreme weather on comprehensive claims, on insurance company revenues and expenses, on the number of new motor vehicle registrations and on the number of people commuting today, compared to past years. They say electric vehicles, including battery electric, hybrid and other plug-in vehicles are being registered more often than in any years prior.

Costlier repair and replacement costs 

According to the report, despite the fact that Quebec encountered the largest five-year increase in the cost of a new vehicle, new vehicles are currently the most expensive in Alberta. (The report also examines rate caps past and present, devoting some analysis to the Alberta auto insurance market.)

Repair costs are also examined in some detail. “As of 2023, the average cost to repair an electric vehicle was $6,795, higher than the average of $5,122 for internal combustion engine vehicles. Generally, electric vehicles are heavier and have a higher rate of airbag deployment, contributing to higher claim costs,” they write. “The high cost of battery replacement also adds to claim costs. Auto insurers can expect to write off more electric vehicles.” 

The auto parts, accessories and supplies component of the CPI, meanwhile, increased significantly in late 2021, peaking in July, August and September of 2022 when year-over-year this measure jumped 9.4 per cent. Repair services followed a similar trend, peaking at 6.2 per cent, year-over-year, in April, May and June 2023. “Although year-over-year percentage increases have slowed to movements more consistent with before the pandemic, the index for passenger vehicle parts, maintenance and repairs was 22.3 per cent higher in December 2024 than in 2019.” 

Vehicle safety, they say, has contributed to fewer fatal collisions but also to higher cost per claim figures. “As of 2023, a total loss is more likely because of ongoing supply chain issues, inflation, high rental car costs and repair delays,” they write.

Rental cars also increasingly expensive  

Finally, the report elaborates on rental car costs as another driver influencing the picture: “As the pandemic set in, many major rental car operators sold off their fleets. When the economy opened back up and consumers began demanding travel accommodations, there was a significant shortage of available rental vehicles,” they write.

The rental of passenger vehicles component of the CPI peaked from September to November 2021. “As of December 2024, rental vehicles cost 20.4 per cent more than they did in December 2019,” they conclude. “Rental vehicles were most costly in June, July and August 2023, a 74.7 per cent increase from December 2019, partially due to the compounding effect from previous increases.”