Auto insurance in Canada is currently in a strange and difficult space.
The last two years saw driver activity dramatically drop thanks to the COVID-19 pandemic and its resulting restrictions, and many insurers responded by offering rebates to customers. And yet for this year, industry experts such as the Insurance Bureau of Canada and RATESDOTCA have warned that rates are set to increase once again.
Even the upcoming general election in Ontario is featuring significant discussions about the province’s auto insurance – where rates are the second-highest in Canada, on average – and why it should be addressed by whichever official wins.
But despite these misgivings, Canada’s auto insurance market cannot be as bad as the US. Or is it?
Insurance Business has recently hosted a special webinar featuring the web-based vehicle history service CARFAX. While the company serves 130 out of the top 150 insurance carriers in the US, it also has a presence in Canada. It also turns out that CARFAX’s representatives for the webinar, Tom Scheffer, director of insurance claims and Don Hendriks, actuary and data scientist, had a lot to say about what is making auto insurance pricier on both sides of the border.
“Here in the US – and I’m sure you see it in Canada as well – we see a lot of increasing industry pressures,” said Scheffer. “Open claims causing higher internal/external expenses, rising costs overall. Higher consumer expectations. More used cars on the road than ever before.”
On the subject of used cars, Scheffer pointed out that during the pandemic, used car prices in the market jumped 40%. The director added that “sophisticated fraud schemes” and the ongoing COVID-19 pandemic are contributing to that pressure as well.
“I know we’re all tired of hearing about an economic uncertainty that continues to unfold, but it’s still relevant,” Scheffer prefaced on the pandemic being considered a factor in driving auto insurance industry pressures.
Naturally, these pressures would lead to increases in insurance costs, for both US and Canadian insurers and their customers. Scheffer explains that while insurers will absorb the jump in repair costs, it will “ultimately be passed down to the consumer.”
“So it kind of hits on both ends, and impacts everyone involved.”
The pressures also affect cycle time for the insurance process and auto repairs, Scheffer warned.
“In our world, cycle time is everything. Time is money. Again, every day a claim sits open, that insurance carrier is incurring costs.”
Consumer satisfaction would also drop as pressures mount.
“There’s an expectation of rapid, fair, trustworthy settlement that needs to take place,” explained Scheffer.
