Our auto and home insurance renewal documents arrived in the mail the other day. The bad news is that insurance premiums are going up sharply in Ontario. Our auto and home insurance premiums went up by 22 and 14 percent respectively even though we did not have any claims in the past year. The hikes were not really surprising because Nordic Insurance Company, our auto insurance provider, obtained approval from the Financial Services Commission of Ontario (FSCO) for two rate increases that averaged 6.71% and 9.40% in the past year alone.

James Daw of The Star reported that the main reason for premium increases is the rapid rise in the cost of accident benefit claims. While the Ontario Government has announced changes that will allow consumers the choice to lower the medical benefits, the insurance companies are saying that they are awaiting greater clarity on the details of the reforms.

It’s possible that there is little you can do about the rise in premiums but it is worth trying to find ways to soften the blow. First, you can always shop around. Last year, I found that switching from Co-Operators to belairdirect reduced our auto premiums by a staggering 35 percent. If you find that other insurers are quoting similar numbers, it may be worth calling your current provider to try and find some savings. Maybe your driving patterns have changed or the insurance provider offers a discount that you’ve been missing out all these years. It may not amount to much but at least you’ll know you tried your best.

This article has 41 comments

  1. One of the main reasons why all types of insurace is going up because it is widely known within the insurance community that insurance companies make very little money when interest rated are down at such very low historic rates. When interest rates are low, the insurance companies obviously make very little money on their investments to off set the rising number of insurance claims and the out of control cost for repairs. Therefore we will see insurance rates rise just like our property taxes. But our insurance rate increases will keep on rising in the double digits until we will see sone significant interest rate increases. Much like Condo Corp reserve funds. If interest rates were a lot higher than they are now, unit owners would be seeing no or small increases to their common expenses. Higher interest rates are good for some but bad for others.

  2. I’m surprised your premiums went up. For car insurance, I got my renewal letter in the mail, and my premiums went down, even though we have a not at fault claim last year that is resulting in a large amount of money flowing from the insurance company towards us. I was surprised the premium went down, however I was glad it did.

    You say you didn’t have any claims but did your situation change last year? did you move to another area that might have higher crime (for home insurance) did you have any traffic violations that appeared on your record in the last year?

    Regards,

    Jason

  3. OHow about an insurance version of a Modest Proposal? By making insurance mandatory, the government effectively creates a cartel of companies who know that people will have to sign up for one of the cartel members’ services. Remove the insurance requirements and the companies will have to be more competitive to get your business. There will still be a healthy business because folks don’t want to be on the hook for so many dollars’ worth of damage, but at least that business will be less regulated and leave more room to find a deal.

  4. @GabyYYZ – And once people start getting hit and injured by people without insurance? Say somebody working a minimum wage job hits you and you’re unble to work for several months. What do you think your chances of obtaining reasonable compensation are if the other party doesn’t have insurance? Slim to none…

    Insurance is only mandatory if you buy and operate a motor vehicle. If you don’t want to pay insurance, you can always take the bus. I’m no fan of the insurance industry, but driving without insurance is not something that should be encouraged, IMO.

    Al R

  5. Canadian Capitalist

    @Jason: Belair explained that my increase was due to an across-the-board hike in premiums. There is no change in situation that would explain the increase. The FSCO reports average rate hikes — it will be higher for some and lower for others.

    @GabyYYZ: I believe insurance should be mandatory as well. We could cut out auto premiums by more than 1/3 if we went back to one vehicle. Alas, we are not able to do that so we have to bite the bullet and pony up more.

  6. Our insurance went up last year in spite of our vehicles being a year older and having no claims. They told us something similar to what you heard, CC, but I also noticed that they had added some coverage that we didn’t ask for. I had them remove it and it saved us $100 or so.

    We’ll renew again in August and I’ll definitely be reading the fine print!

  7. @ Jason, the increase is an industry wide increase. In Ontario pretty much everyone saw an increase, Alberta on the other hand had a decrease in most of the private passenger insurance.

    Contrary to popular believe, the insurance industry is HIGHLY regulated in Ontario. Carriers cannot just increase the premiums as they see fit, it has to be backed up and FISCO has to approve it. Similar to banks insurance companies have to keep a minimum reserve fund.

    Biggest issue is Accident benefit payouts in Ontario.

  8. Well, it was in the spirit of A Modest Proposal (http://art-bin.com/art/omodest.html) 🙂

    But seriously, the only other option then, if the government makes insurance mandatory, is to have even tighter controls on insurance companies, who will of course complain about government interference, but if they are a willing participant in a government mandated program, they really don’t have much say about a free market system.

  9. I wish the media would stop repeating such obviously BS claims. Rates are up, as another poster said, because the economy tanked. Insurance companies invest the capital they retain to cover claims in the market. When he market tanks, they need to raise premiums to meet their capital requirements (and restore profits). Basically, they gamble on the stock market – if they win, they get huge profits. If they lose, the pass the pain to the consumer. It’s a win/win for them.

    The other farce is that Dalton keeps letting these guys lower the standards of their products so he can claim he is doing something. All he’s doing is letting people obtain inadequate coverage for expensive injuries.

  10. I also use BelairDirect – they have been great to deal with- although, I have never made a claim, so my experience is limited. You can get a discount if you bundle your home and auto insurance, which I hadn’t really encountered with the few other agents I had dealt with (notably RBC Insurance).

    Anyhow, maybe bundling insurance is common knowledge, but it saved me money that I wasn’t saving with RBC.

    TEMPLE

  11. Ouch..those are some pretty hefty increases. You’re right – shopping around can make a difference. I recently shopped around for me and my wife’s vehicles and by raising the deductible, we were able to lower the monthly expense that way too.
    Nice post

  12. James Daw is partially correct, but another contributor to the increase in premiums is the actuarial requests of the insurance co’s bean counters to bump up their capital reserve ratios for the losses they took on maturing segregated funds as of late. Further, the reason you see big price variances is that there is a certain amount of off-the-record collusion between insure co’s who all have price and demographic bands that they are most competitive in relative to each other. For example, Sunlife might be the most competitive at ages 50-55, but co-operators might be the best at 45-50. Stickiness to one’s insurer means that the profitability varies over the lifetime of a policy holder, but people’s reluctance to change means that people will tend to swallow the increases more than they change for lower prices.

    Great blog, one of the best around – keep up the great work.

  13. I liove in good old Ontario. again my premiums went down while at the same time I have a very expensive not at fault claim going through their system. Based on the money that was spent last year on my claim, I’m only paying back 1/77 of what was spent. And the claim is on going, they are going to be forking over more cash in the upcoming years.

    I find it odd that my preiums decreased, while yours shot up.

    regards,

    Jason

  14. My insurance went up $5/year, with the excuse that it was due to the replacement cost of the car going up. I have no problems with that. Meloche Monnex Group Insurance, one of the best deals I have received in the last 5 years.

  15. I just renewed in January and my premium for combined home and auto coverage increased by 3.5%. I guess I should consider myself lucky considering others have seen their rates increase by as much as 30%. I checked the breakdown of charges and it’s the mandatory provincial insurance coverage that went up in the price. I did shop around and made some calls but for the most part no one else provided me anything better for the amount of coverage that I currently have, so I elected to stay with the same company.

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  17. Thanks to the Canadian Capitalist – again. This post came at the same time as my Co-Operators home and auto renewal. Overall increase of 9.6% over last years rates, and of that the home policy went up 22%! I called to ‘inquire’, there was nothing to be done. However, we paid off our mortgage in January. Co-Operators gives us 24% reduction on home insurance as there is no mortgage – who knew!

    Thanks CC!

  18. Canadian Capitalist

    @Cindy C: It’s interesting that insurance companies give a substantial discount for a paid-off home. Sounds like one more reason to have that mortgage burning party as early as possible. Thanks for your note.

  19. Pingback: Mortgage Free? Ask for a discount on your home insurance | Canadian Capitalist

  20. Our cars and home ( in eastern Ontario) have been insured with Cooperators for the last 41 years . About a week ago we received our 6 month premium renewal in the mail and were shocked to learn that our home insurance would be increasing by a whopping 73% (136% since 2000) .

    Over the last 36 years that the house has been insured with Coop, we have had a very small claim following the 1998 ice storm and a second claim for about $45K in 2005 when the house was hit by lightning .

    In order to understand the increase and what could be done to decrease it ,we immediately called Coop and requested a meeting with the branch owner . On Monday we met with a sales associate who told as that the factors influencing the increase were:
    * house is heated with oil
    * potential for sewer backup and basement flooding ( sump pump)
    * house is old ( built before 1930)

    We were also told that the Coop and other insurance companies are not making sufficient money and will also be increasing premiums , perhaps not as aggressively as the Coop. Head office sets the base premium rate and the local agent just adds any supplementary options requested by the customer , applies the appropriate discounts and deductables and the customer’s credit score . Our rate fortunately was not affected by a poor credit score or “insurance score ” as they prefer to call it.

    Consequently , the only options we had to lower our cost were :
    * eliminate the coverage for sewer backup and sump overflows
    * increase our deductable

    Obviously these had very little impact on the total premiums and were really not worth removing .

    One final piece of information which we found very surprising was the fact that the Coop will no longer insure any houses built before 1930. This new rule seems rather peculiar to us since one would think that any house in good condition and having survived for 135 years ( as in our case) would be a reltively low risk.

    As a last resort we emailed the Coop’s Customer Liason Officer, Denise Fleishmann, but so far have not had a response.

    Apparently brand loyalty carries no weight.

  21. Would be interesting to know which Cooperators office gave Cindy C a 24% reduction for being mortgage free. Our reduction was only 10% and it’s impossible to tell if we even got that since none of the so-called discount savings are actually broken out on the insurance bill. All discounts are shown as being included in the premium and the sales associate we met with couldn’t tell us what the actual savings were for each discount. Another reason for avoiding Cooperators.

    Don

  22. Canadian Capitalist

    @Don: When I called Belair-Direct, I was told what discount I would receive for my home insurance if I was mortgage-free. It did not seem like the discount was the same across the board because I was told that it would depend on the policy.

  23. Thanks for the info. After our discussion on Monday with the Cooperator’s sales associate I have a very hard time believing much of what they say. Belair -Direct may operate much differently than Cooperators and it’s quite possible that they have different mortgage free rates depending on the policy BUT the bottom line is…. can they show you the base rate for your premium and the amount they have deducted for the mortgage-free discount and each and every discount that applies to you. Cooperators will not show you the base rate for the premium …only the final amount after all the discounts have been applied. I therefore have little if any faith that we are actually receiving any discounts .
    However I would still be interested in knowing which Cooperators office gave Cindy C a 24% discount so that I can at least raise this with our local agent.

    Thanks !
    Don

  24. I just received my renewal notice for Ontario home & auto insurance from Trafalgar Insur. Co. of Canada & in spite of no accidents/no claims it reflects a 34% increase over last year. No attempt to justify the reasons for this increase could possibly satisfy me. I wish I could get a 34% increase in my pension – just once!

    The Greypower Agent just brushed me off with, “Everyone’s rates are going up this year.” – as if that justified the additional $678.00. What must the increase be for clients without years of clean records & on-time premium payments?

    Dave

  25. We shopped around and managed to get better coverage at a cost which was slightly less than Cooperators price before the 73% increase . We used a local agent in Brockville ( DLK Insurance ) and are now insured through Gore. We could have gotten a similar price through RBC . Didn’t try Allstate but have been told they are quite competitive too.

    Will be shopping around every year to ensure that we are getting the best possible coverage at the lowest cost.

    Don

  26. My Aviva Traders General Insurance renewals arrived and my auto & home premium increase are 50% & 30% respectively. Is this even legal??

  27. You can save $$ on car insurance premium !!

    The insurance companies increase everyone’s insurance premium even if you have a perfect and long driving record. Why!? It’s simply because everyone is paying for others’ high claim from car theft and accidents. In Manitoba, the province has successfully lowered car theft rate by 75% since the implemention of ULC-S338/98 qualified immobilizers equipped in vehicles. If the Ontario government is paying attention to the solutions which can bring overall car theft rate, so can everyone’s car insurance rate.

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  29. my son had car insurance with a broker A through insurance company B (has been with company B over 7
    years. This year son shopped and found broker C who placed him with same insurance company B at
    enough premium reduction ( I cant remember exact % 20-30 ) for son to switch brokers. My son is now
    29 years old so you can imagine what previous annual insurance costs were like. Was broker A taking
    advantage of son? keeping in mind that insurance company B knows his driving record and claims
    history. On a weird note son hit a deer with truck(passenger front end)in morning daylight hours going
    south on Highbury near Hamilton Road ,London Ontario. Deer ran out between houses,which is
    built up urban area. Thanks to insurance high 4 figure repair was done.

  30. Our house insurance has risen by 60% over two years, 2009/10. We are looking around but the differences are small…only $440 so far in our search. Been with Aviva/Pilot for 40 years. Will try Cooperators. At least they are solely Canadian.

  31. My insurance(aviva/traders) went up by about 70% for my 2010 renewal. I thought that such an increase was illegal, but apparently not.

  32. 1. What CC failed to tell you is that Nordic Insurance is a market for “high risk” drivers – too many traffic violations, accidents, etc.
    2. I notice that most of you are not using brokers but are dealing directly with the insurance companies. My broker looks after me. He’s my insurance buyer. We’re also paying a lot more for our consumer goods than we did a few years ago.
    3. Why do people expect the price of a commodity to stay the same year after year – or expect the cost of insurance protection to decrease simply because you didn’t use it??

  33. @aretwodeetoo: Actually, I’m with belair direct and certainly not what you call a “high risk” driver. And secondly, this post is about how to reduce the blow from an insurance price hike. If going through a broker saves you money, I’d be happy to do that. But for us, broker quoted premiums were much higher than the current provider. When the time for next renewal arrives, we’ll be shopping around again.

  34. My home insurance premium for 01-01-2011 is up 42% with reduced coverage. No claim in 20 years. Why does the Ontario model problems impact me in BC so harshly? If I could I’d bring it home but alas there are legal crooks out here and not just in the center of the universe.

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  37. Just got my renewal for 2 cars at Belairdirect – for 2 consecutive years I receive 30% increase on every renew. That comes 60% combined! No claims, no accidents, same average cars, same place etc. Belair explanation is quite generic – they attributed it to the overall trends and not to my profile. It sounds that it’s time to shop around, but considering the ‘trend’ I’m quite skeptic though ..

  38. I got a letter from Belairdirect with suggestion to pay extra 860 dollars annually for my car insurance. On this time my car insurance exceeded 4K annually and became more than my monthly salary after taxes!
    Why we all are keep quiet about how insurance companies pull out extra money from our pockets?
    There are increase limits for landlords. Why we don’t have the same for car insurance companies?

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  40. About giving a break in home insurance for a paid off home, is crap . Ours has been paid off for 4 years and our insurabce has gone up 50-100$ /yr. This yr 2012, our ins. was going to go up $200/yr because we had big wind storm in St. Catharines Ont. With no claims in 17 yrs that we have lived here, so everyone get ready for an increase in your home insurance premiums. Cause here it comes. What is the government doing trying to get the little man to help pay for this deficit that We did not encurr.

    • @Mark: Did you try calling and asking your insurance provider whether they have a discount for a mortgage-free home? (Mortgage-free means no mortgage or lines of credit secured against the home). My understanding is that the discount is not automatic. The client has to call and let the insurance provider know that the mortgage has been paid off.