Yes, auto insurance is expensive: Here’s why it needs to be

The title of this blog post alone is probably enough to make the average policyholder’s blood boil. When it comes to insurance, it’s easy to feel like you’ve been given the short end of the stick. 

Yes, auto insurance is expensive (especially nowadays). But it needs to be, and here’s why. 

Between October 2023 and October 2024, car insurance premiums Canada-wide have increased nearly 8.8%. Compare this to the increase last year, between October 2022 and October 2023, which was 4.6%. At the end of 2024, we’ve seen significant shifts in the state of car insurance rates in the country. 

This isn’t much of a surprise, given the disproportionate (and expensive) number of severe auto insurance claims this year, plus the increase in auto theft. Inflation has been less of a factor, but even so the general trend for auto insurance has been on the up and up, with no hint of relief in sight. All these variables combined have been impacting the cost of auto insurance.  

Rates are increasing due to a number of variables driving up costs and the average cost of auto insurance in Ontario is $2,006. That’s nearly a 20% increase from what it was in October, 2022.  

It’s not because insurance companies are trying to better their profits or are “greedy,” it’s because they have a duty to continue to pay claims—no matter how expensive they are. With claims costs rising, rates will continue to go up so that insurers can continue to afford claim payouts 

Auto insurance is an essential product, which is why it’s legally required for all drivers. Having the right insurance—as well as understanding what it covers—is invaluable to customers. Unfortunately, there’s so much misconception, and filing claims can be such a stressful process it’s no wonder why the topic of insurance is so wrought with anxiety and distrust.  

So long as cars continue to cost more to build and repair, auto theft is still rampant, and fraud still exists, insurance rates will continue to rise. For many, this could be a significant setback for their financial goals. It’s just one element of car ownership that’s becoming increasingly worse. 

What’s the solution, then? We all want affordable insurance. There’s no big change that can be made to the system to resolve everything, but perhaps small, simple adjustments with time will slowly begin to reverse the issue. 

Ontario’s current system for insurance carriers to request approval for changes to auto products obligates the FSRA to respond within a set period. If a response is not received within the 25-window, the filing is approved.  

 In January 2024, a change was made to auto insurance in Ontario to give drivers more choice in customizing their coverage. OPCF 49 allowed drivers to drop direct compensation-property damage (DCPD) from their policy, meaning they would not have coverage even when they are not-at-fault for an accident.  

This approach makes drivers more vulnerable by placing greater responsibility on them rather than the insurance companies. However, customization options like these could be a step forward, even if they aren’t typically recommended for the average policyholder. 

Insurance may “need” to be expensive, but does yours have to break the bank? Not necessarily. There are ways you can get cheaper auto insurance for yourself, like being a safe driver and having a clean driving record, opting into insurer telematics programs, bundling your policies through the same insurer, etc. It won’t change the system, but it could put more money back in your pocket. 

And of course, a broker’s job is to help you find the best deal. As insurance experts, brokers collaborate with you to secure affordable car insurance, even if external factors like a poor driving record, inexperience, or previous cancellations might impact your rates. We’re here to help you find a suitable solution for your needs and budget. 

Dropping coverage to make your insurance more affordable isn’t generally recommended either, as it could end up costing you more in the long run. There are few scenarios where dropping certain coverages may make sense, and we recommend speaking with a broker before making any big steps.  

The future is uncertain, but as insurance technology improves, we might see changes. Better underwriting could lead to more stable rates and potentially cheaper policies. 

Telematics could improve or become a requirement among insurers, and predictive analytics could improve, ensuring each driver is more accurately assigned rates based on their risk profile. 

Could this mean rates will decrease? Well, maybe. But at the same time, claims’ costs are one of the biggest drivers in rate increases, and unless cars start becoming less expensive to repair, it’s unlikely that those will decrease. 

Have additional questions regarding auto insurance, rates, or another topic? Give us a call.