As the United States prepares to impose sweeping tariffs on Canadian and Mexican imports, concerns are mounting over how the rising costs of vehicles and auto parts will impact insurance rates in Canada. While insurers and regulators are still assessing the potential effects, many in the industry fear that higher repair and replacement costs will inevitably be passed down to consumers.
With President Donald Trump confirming that a 25% tariff will take effect on Tuesday, Canadian insurers are bracing for the economic fallout. The move is expected to drive up the price of vehicles and car components, especially given the deeply integrated North American auto supply chain.
Canadian insurers are monitoring the situation closely, as the tariffs could significantly raise the cost of repairing or replacing vehicles after accidents. Auto parts often cross the U.S.-Canada border multiple times before a car reaches the showroom floor, meaning the tariffs will compound at every stage. Additionally, planned U.S. duties on steel and aluminium—key materials in vehicle manufacturing—could push prices even higher.
According to a spokesperson for the Insurance Bureau of Canada, while it’s too early to determine the precise impact on premiums, insurers will likely feel the squeeze soon after the tariffs take effect. Higher claim costs often translate to higher insurance rates, particularly in provinces where private insurers must justify rate hikes to regulators.
Provinces with public auto insurance, including British Columbia, Saskatchewan, and Manitoba, have acknowledged they are reviewing the situation. In provinces like Ontario and New Brunswick, where private insurers operate within a regulated framework, some companies have already made preliminary inquiries about the possibility of rate adjustments.
Although no official rate hikes have been announced, industry experts suggest that rising vehicle costs could accelerate the already steady climb in auto insurance premiums. Insurify, a U.S.-based insurance comparison platform, estimates that American policyholders could see rates increase by as much as 8% by the end of 2025 due to the tariffs. A similar trend could unfold in Canada, where insurers are already grappling with inflation-driven cost increases and a surge in vehicle thefts.
However, not all industry leaders are sounding the alarm. Charles Brindamour, CEO of Intact Financial Corp., Canada’s largest property and casualty insurer, said in an earnings call that his company has taken steps to mitigate supply chain risks, including sourcing more parts domestically. “Our ability to manage the supply chain will help soften the impact,” he told analysts.
Even so, Brindamour acknowledged that insurers have the flexibility to reprice policies on an annual basis, meaning that if costs continue to rise, rate increases could be inevitable.
The Bank of Canada is also keeping a close eye on the economic impact of the tariffs. The Canadian dollar has already taken a hit, falling below 69 cents U.S., and speculation is growing that the central bank could cut interest rates at its next policy meeting to help counteract economic pressures.
Some provincial governments are also weighing their options. Alberta’s Finance Ministry has indicated that while it is closely monitoring the situation, it has no immediate plans to lift the province’s 7.5% cap on annual insurance rate increases for drivers without recent at-fault accidents.
Meanwhile, Quebec’s Autorité des marchés financiers has held discussions with insurance providers about the tariffs, though it has not signaled any policy changes yet. The Canadian Automobile Insurance Rate Regulators association is also considering conducting a study to better understand the potential long-term effects.
While the immediate effects of the tariffs on insurance premiums remain uncertain, most experts agree that if the cost of vehicles and repairs continues to rise, policyholders will eventually feel the impact. “A trade war would accelerate the cost of insurance,” said Matt Hands from Ratehub.
For now, Canadian drivers will have to wait and see how insurers and regulators respond. But with trade tensions escalating and economic pressures mounting, relief from rising insurance costs is unlikely to come anytime soon.
