Why Insurance Premiums Are Increasing
Over the past 10 months, many insurance policyholders in Ontario have seen a significant change in their insurance premiums and renewals. One question that brokers are asked the most is, “why have my insurance premiums gone up?” While a policyholder may not have had any impacting factors to contribute to the increases, it’s the bigger picture that needs to be considered and it primarily involves the cost of insurance claims.
One of the biggest expenses an insurance company faces is the cost of claims and these figures continue to rise at an alarming rate. For every dollar an insurance company receives from its policyholders, approximately 56% of it goes towards claims payout. Whether it is auto insurance or property insurance, claims frequency is on the rise and insurance companies, in both Ontario and across Canada, are trying to find a business balance between expenses and profitability. The unfortunate result can be increases in insurance premiums however these increases must be approved by the FSRA – Financial Services Regulatory Authority (Ontario).
Over the past 25 years, the trend on property claims frequency and severity has risen substantially, with the past 5 years having the most impact on the premiums we see today. According to the IBC (Insurance Bureau of Canada), 2016 is probably the most notable as it was recorded as having the highest-ever losses for a single year; $5.1billion. Of that amount, $3.8billion (60,000 claims) went towards the damage and losses caused by the fires in Fort McMurray. In 2018 Ontario experienced significant increases in recorded property claims, primarily due to weather-related incidents such as flooding and storm damage.
Auto Insurance Claims:
As with property insurance, the auto insurance sector has also seen a rise in claims frequency, especially with regards to vehicle theft, Liability lawsuits, Accident Benefits claims and fraud. The average auto policyholder in Ontario carries a $1million Liability limit on their auto insurance – not since 1992 has that amount been enough for Liability lawsuits. The average liability lawsuit, according to the IBC, has the potential to exceed $5million so it’s worth considering increasing your limits.
Accident Benefits fraud has also impacted insurance premiums and continues to be an area regulatory bodies are monitoring simply due to the volume of vehicle injury-related claims.
Insurance providers are constantly having to adapt to the ever-changing environment they find their consumers to be in and these factors can impact how an insurance premium is calculated or how an insurance company builds their underwriting criteria for business. Technology is now a major part of our lives with homes and vehicles all being adapted to the fast-paced technology that is being produced, however, insurance providers are not able to keep up with the increasing rate that technology is being incorporated. This can leave potential gaps in insurance coverage not many consumers are aware of and that’s where a licensed insurance broker can help; the main job of an insurance broker is to listen to their client’s needs and recommend the best coverage available.
If you find yourself facing increased insurance premiums and are looking for other options, we can provide quotes. Call 1-877-454-4476 today to speak with one of our licensed insurance brokers.