Auto insurance rates have resumed rising after a two-year decline. You might be surprised to learn that the pandemic has also increased insurance rates at the present, on top of an increase in inflation.
Changes in auto insurance rates post-pandemic
According to the Financial Services Regulatory Authority of Ontario (FSRA), the average premium reduction across the industry in 2020 was 7.1%. Insurance providers helped customers during COVID-19 by offering rebates, restricting premium increases at renewal, or reducing premiums.Post-pandemic, as everything is going back to normal, the number of cars on the road has increased, which drives up the prices of car insurance. The likelihood of an accident rises as more people use the roads for commuting or leisure travel. More claims are filed as a result. When insurance companies have to pay out more claims, they must raise insurance rates to make up for the loss.
Impact of inflation on the car insurance rates
The cost of replacing and repairing cars increased when the inflation rate reached 8.1% in June of this year. Moreover, Costs for auto repairs have been negatively impacted by the semiconductor supply chain problem on a global scale. If your vehicle is damaged in an accident, you can anticipate paying more for repairs because the price of replacement parts has increased by 5.5%.
Additionally, the time it takes for auto shops to finish the repair is longer due to a lack of labour and replacement parts. Your car has to spend a lot of time in the garage as a result, and you have to use a rental vehicle during that time. For example, your insurance pays the entire cost of your rental car or reimburses you for a portion of it. All of these expenses will raise your insurance rates as they add to the claim expenses. As previously mentioned, the cost of filing a claim is also taken into account when calculating your insurance premium; as a result of inflation, rising claim costs would result in higher auto insurance rates.
However, you won't immediately notice an increase in your insurance costs. Your rates won't change mid-policy, you will notice the change during the renewal of your insurance policy. Hence, before renewing your policy, you will be able to shop around and compare prices from various insurance providers. You can visit Ontarioinsurance to get customized rates and professional advice.