Study: Impacts of rising costs and claims on personal automobile insurance profitability and consumers in Canada, January 2020 to December 2024
Released: 2025-04-02
Automobile insurance premiums trend upward
In recent years, high claims costs have led to rising automobile (auto) insurance premiums for consumers, as measured by the passenger vehicle insurance premiums Consumer Price Index. Premiums increased most notably in 2019 and 2024 compared to the previous 10 years, reaching a peak of 9.6% year over year in July and September 2024. Premiums trended downward during much of the COVID-19 pandemic; however, despite many consumers driving less, parking and not using their vehicles, and receiving rebates during this period, auto insurance premiums as of December 2024 were higher than pre-pandemic levels in most provinces. Ontario and Alberta had the highest auto insurance premiums in Canada.
The study "Impacts of rising costs and claims on personal automobile insurance profitability and consumers in Canada" explores the impact of rising claims costs on Canada's personal automobile insurance sector, with a focus on the impacts on company profitability and consumer affordability.
Vehicle price, features and repair costs increase claims costs, impacting insurers and consumers
In all provinces, the passenger vehicle parts, maintenance, and repair Consumer Price Index contributed to higher claims costs, increasing 22.3% from December 2019 to December 2024. In addition, the price of new and used vehicles has risen substantially compared to pre-pandemic levels. From December 2019 to December 2024, the median price increased 61.5% for new vehicles and 82.2% for used vehicles. Part of this rise can be attributed to pandemic shutdowns and supply chain delays.
Vehicle make, model, and engine type also contributed to the premium paid. Higher-priced vehicles, vehicles more prone to thefts or those with higher repair costs will typically have higher auto insurance premiums as they pose more risk to the insurer. Personal driving history and demographic features such as age are also important considerations in examining premiums.
Although claim frequency has risen in some cases, the primary cost driver is the substantial increase in cost per claim, driven by higher overall associated expenses.
Thefts and extreme weather impact comprehensive claims
Thefts increased sharply in 2023, surpassing $1.5 billion, impacting Ontario the most. In 2023, Ontario had a comprehensive claims ratio (see Note to readers) of 190%, meaning for every dollar that insurers collected in comprehensive premiums, they paid out one dollar and ninety cents. As of the first half of 2024, auto theft had decreased by 17% compared with the first half of 2023.
Extreme weather has also impacted comprehensive claims, with each year from 2020 to 2023 ranking among the top 10 costliest years and with 2024 being the costliest year on record, surpassing $8.6 billion in catastrophic claims (see Note to readers). For auto insurance, extreme weather claims made up 2.3% of total claims averaged from 2014 to 2023, significantly less than the portion of homeowners' insurance claims consisting of extreme weather claims.
Higher claims costs put downward pressure on insurer profitability
For insurers, higher expenses driven by the aforementioned claims costs have created a need to increase revenues to offset higher risks and reduce the likelihood of losses. Insurer revenues are largely driven by the premiums consumers pay. Due to increased revenues, insurer profits have remained stable despite some unfavourable quarters. From the first quarter of 2020 to the fourth quarter of 2024, the quarterly combined ratios (see Note to readers) and net insurance service ratios (see Note to readers) of many insurers have approached or exceeded 100%, indicating that they were unprofitable on underwriting alone in these quarters, providing a rationale for the pursuit of increased revenue.
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Note to readers
Definitions
Comprehensive: Typically covers fire, theft, civil disturbance, transport, or extreme weather such as lightning, hail, water, wind, and earthquake. Depending on the specific company and policy, other items may be listed or excluded from the list. Comprehensive coverage is optional in all provinces except Saskatchewan and Manitoba.
Claims ratio: Claims ratio = net claims incurred / net premiums earned. A lower ratio is better because it indicates an insurer's ability to pay claims costs.
Comprehensive claims ratio includes comprehensive claims and comprehensive premiums.
Catastrophic claims: Claims in excess of $30 million in insured losses caused by extreme weather.
Combined ratio: Combined ratio = net claims incurred + expenses / net premiums earned. A lower ratio is better.
Net insurance service ratio: (1 – (Total insurance revenue – Insurance service expense + Net expenses from reinsurance contracts held))/ Total insurance revenue. A lower ratio is better.
Products
The study "Impacts of rising costs and claims on personal automobile insurance profitability and consumers in Canada," part of Analysis in Brief (11-621-M), is now available.
Contact information
For more information, or to enquire about the concepts, methods or data quality of this release, contact us (toll-free 1-800-263-1136; 514-283-8300; infostats@statcan.gc.ca) or Media Relations (statcan.mediahotline-ligneinfomedias.statcan@statcan.gc.ca).
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