Why Does my Auto Insurance Keep Going Up?

SUMMER IS HERE, AND FOR A LOT OF PEOPLE....THAT MEANS INSURANCE RENEWAL TIME!

Your standard 12 month automobile policy is over, and if you're paying attention you may have noticed a bump in the costs. 

“Why did it go up!?
I wasn’t even in any accidents.” 
- almost everyone

The fundamental idea of insurance pricing is that it's based on the RESULTS OF EVERYONE...
not just YOU.

We all chip into the pot, and the pot is there for those who need it. 
YES every household's ante is different based on their situation but that's the general plan. 

Each year insurer's rely on last year's information to help them predict what next year should cost.

Spoiler alert. It's not going down.  ​

Insurers are trying to predict what it's going to cost for a whole province to drive around doing whatever they want while they pay for the associated damages. 

Even if they  were  able to magically predict the costs they can't just decide to jack up everyone's rate 20% without a reason like we tend to imagine.

AUTO INSURANCE companies have to 'FILE RATES' with the provinces who review and do their best to avoid forcing Nova Scotia residents to pay any more than they have to.

From what I  understand companies are seldom able to receive the increases they even ask for.
If they NEED 10%, they may only get 5 or 6%.

"I could live with 5%, but I'm up 18%.
​That's more than the province allowed!"

Premium increases are achieved PROVINCE WIDE, but they don't land evenly on every customer. The prices for INDIVIDUALS are so broken up that it's challenging to wrap your head around.  

Here's an Example:
Company A gets an approved 10% premium increase for 2018. 
Perhaps before ANALYTICS showed up to the party that 10% just went right on the top and everyone paid more.
*This was before my time, but I'd be interested to know if it really was that basic.  

TODAY...that 10% gets spread around all over the place.
Companies are focused on figuring out which SUB-SEGMENTS of insureds NEED that 10% the most. Perhaps young drivers are 'under performing' and so are people who drive Volkswagens, and people within 5 blocks of a liquor store.
Of course I'm making these up as I go, but those all seem totally possible to me as examples.

Whether you see an increase this year is related to your policy containing any of those INDIVIDUAL RATING VARIABLES. The more of those characteristics they're targeting that you have...the more of an increase you see. 

Some people will go up 30%, others not at all...EVENTUALLY leveling out at a total 10% across the province.  

OK.  BUT WHY do they need MORE EVERY year?

The FULL answer to this requires serious research and I'd rather not do that right now.
So instead here's some quick points based in fact, but are really more anecdotal. 

#1 - Injury Claim costs. 
​People take a long time to heal/recover from serious accidents. 
People always talk about 'fender benders' but injury is the real cost here. At a conference last year the CEO of a major insurer stated that 'well over half of automobile premiums are earmarked for injury costs.'
This is probably the most obvious and talked about reason for increasing auto rates right now in Canada. 

#2 - Robot Cars. 
It's safe to say the days of a $300 bumper repair are gone.
Things like BACKUP CAMERAS, COMPUTERS and SENSORS have become a nightmare for vehicle repair shops. 
I'm guessing a lot more 'replacement' is happening than 'repairing' on these. 

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"According to the U.S. Bureau of Labor Statistics, prices for motor vehicle repairs were 61.07% higher in 2017 than they were in 2000."

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#3 - Inflation. 
It's easy to forget since years go by so fast these days, but inflation is happening and insurance is no exception. This factor alone....and by itself would be a justified increase in my opinion. 

​Honestly I struggle to imagine premiums ever decreasing in my lifetime.
Make peace with the fact that the cost will slowly rise over time like all goods and services.

Suck all the value you can out of a good relationship with a broker. 
Let them make sure you're with the ideal company for your circumstances, and that you have access to expertise when you need it. 

You're paying every year, so at least buy something you feel good about.  

​MD