Repair costs for vehicles in Canada are increasing. The cost of repairs are one of the many factors that can influence auto insurance rates—so when they go up, your insurance premiums could, too.
There are a number of reasons why car repair costs are increasing. Let’s explore why they’re impacting your insurance.
How vehicle repair costs impact insurance rates
Certain brands of vehicles cost more to repair after an accident, which contributes to higher insurance premiums. Up-scale, rare, or exotic vehicles are often expensive to repair and replacement parts may be in short supply.
See, because the cost of repairing your vehicle directly affects the amount of a claim payout. If repair costs are high, insurers will increase premiums to offset potential losses—and to ensure they have enough funds in their pool of payout money to continue covering valid claims.
Which cars cost the most to insure? Usually newer models with advanced technology are pricier due to the higher cost of repairs for these features. However, repair costs are just one of many factors that can influence how much a car costs to insure. Things like theft rates (if the car model/make is on the most stolen list), car safety rating, horsepower, and more also affect your auto insurance premiums.
Why are car repair costs going up?
Everything’s getting more expensive nowadays, from groceries to gas and even car repair costs.
In short, here are the reasons why car insurance repair costs are increasing:
- Increasing complexity of vehicles
- Increase in car technology and luxury features
- Increase in volume of manufacturing luxury vehicles
- Supply chain issues for repair parts
- Higher labour costs
- Increases in collisions and damages
- Shift towards OEM parts usage
EVs and repair costs
Electric vehicles (EVs) present a lot of benefits, from their minimal maintenance costs, savings on fuel, and environmental friendliness, but their upfront price can be a deterrent. However, as purchase prices come down, yet another challenge arises: claim costs, which can directly influence insurance costs.
According to Auto Service World, the total write-off rate for EVs was around 7.48% in the first quarter of 2024. This is a figure up 8% from Q4 in 2023 and 30% up from Q3 in 2023. This is important for EV insurance costs because more claims for EVs signals that EVs might be likelier to be involved in accidents, and as a result many insurance providers may rate EVs higher.
Claims’ cost aside, there are numerous challenges that come with repairing EVs, from the number of mechanical labour hours required to fix EVs and the nature of the skill that is required to do so. This can be reflected in the rate you’ll be charged to insure your EV.
Like gas-powered vehicles and claim costs, EV claim costs are likely due to a combination of factors. With EVs especially, there’s an increase in the complexity of vehicles being manufactured, improved technology, and less supply for major components to do repairs.
Issues with rising repair costs that EVs face are very similar to issues faced by gas-powered cars. However, with Canadian mandates to increase sales of passenger vehicles that are either EV or hybrid, repairing/restoring these vehicles may become more commonplace in the next few years and so rates could potentially fall to reflect this.
What you can do about rising auto insurance rates
When it seems like auto insurance is on a never-ending rise, you might be wondering what you can do to manage your budget. While rising repair costs are out of our control, there are ways you can manage your own rates: Work with an insurance broker when car shopping – When shopping around for a new car, consider enlisting a broker to help you through the process. They can provide insurance quotes for the different vehicles you’re considering to help you see which has the most affordable premiums.
- Consider bundling – Home and auto insurance bundles can save you hundreds of dollars annually, plus they come with the added convenience of having everything in one place.
- Take advantages of discounts – Ask your broker about loyalty, safety, and other insurance discounts to help you save even more money.
- Ask about reduced driving options –If you’re driving less because you’re working from home, using public transportation more often, or for other reasons, you may qualify for a reduction in premium. Pay-as-you-go insurance might be a good option too.
- Pay annually – If financially feasible, paying for your policy upfront for the entire year can help cut out the administrative fees that would come with paying monthly. Some insurers will discount policies that are paid upfront, too.
Have more questions about insurance costs? Need help finding an affordable auto insurance policy? Our team of insurance brokers are happy to help. Give us a call and request a free, no-obligation auto insurance quote today.
