– In collaboration with Promutuel –
Typical reasons for changes in insurance premiums
Car insurance premiums have been increasing across the board in recent years. This is due in part to recent events, but there are other more basic reasons why premiums have been increasing. In addition to changing current events, your insurance premium can vary for reasons that are specific to you.
Before we look at these reasons, let’s go over the way that car insurance premiums are calculated and the factors that affect your premium. This information can help you understand the recent changes in insurance premiums.
How premiums are set
When you request a quote, you provide the insurance company with the information it needs to determine your profile and the type of car you drive so it can determine what car insurance coverage is best suited to your needs. Here’s how this information is used to determine the premium for your policy.
Your insurance profile
First off, your insurer uses information such as your age, vehicle use, place of residence, and driving history to determine your premium. This information helps the insurer determine how much driving experience you have and how much of an insurance risk you represent.
In other words, the more you can prove you’re a low risk, the lower your premium is likely to be. Your address tells the insurer if you live in a high-risk area and your credit rating tells them about your financial stability.
In addition to your personal information, the car you drive may be another reason for an increase in premiums. For example, there’s a big difference between insurance premiums for a used car vs. a new car. And electric cars or rare models that can only be repaired at certain specialized shops also affect rates.
Your choice of coverage
Based on all these factors, your insurance company will propose a policy designed to give you the best coverage at the lowest cost. On the one hand, your policy will include mandatory coverage known as civil liability. This covers you in the event that a third party (or their car) is injury or damage in an accident if you are at fault. You can also choose from a variety of other types of coverage, including:
“All perils” coverage
Collision and upset coverage
Coverage for perils other than collision or upset
Specified perils coverage
Each type costs a different amount. Your representative will help you choose the right insurance so you aren’t paying more than you need to.
Reasons why premiums vary
The criteria mentioned above all play a role in determining the cost of your premium. However, there are other factors that can cause your car insurance to go up. These include things like your insurance history (number of past claims) or a change in circumstances that affects information you previously submitted.
Note that your claim history affects your premium when you first sign your insurance contract and when you renew it. If you regularly submit claims to your insurer, your insurance premium will go up.
Your car insurance may also increase if there are changes to the information you provided when you purchased the insurance. For example, if you live in a rural area and move to the city, or if your teenager starts driving your car, your premium will likely increase.
New criteria for increases
Your personal situation doesn’t always explain increases to your premium. Premiums have been on the rise in general for the past several years. You may find that your premium has changed even if your situation has not. Here are some reasons that car insurance premiums have increased.
Rising repair costs
One reason for the increase is the cost of repairing insured cars. Models with new technologies cost more to repair. Newer cars have technology that makes them more efficient and enjoyable to drive, but it also makes them more expensive to repair. Insurers have to offset the impact of these innovations on costs.
Most newer car models are also made out of complex materials. Newer vehicles have parts (windshields, mirrors, sensors, cameras, screens, etc.) that are more complex and fragile and cost more to repair. With more and more of these new vehicles on the road, premiums have increased across the board.
Increase in distracted driving accidents
Another reason car insurance costs are rising is the number of accidents. As noted above, if you make frequent claims, your premium will go up. The increase will be even greater if the accidents are due to driver distraction. Accidents are assessed based on the nature of the claim and not the cause. According to a survey published by SAAQ, one in ten Quebecers is distracted when driving.
Tips for keeping your premium down
As you can see, premium increases don’t depend solely on decisions made by individual insurers, but rather on a combination of factors. Nonetheless, there are good habits you can adopt to try to keep your premium under control. And if enough people follow your example, it could benefit everyone.
All you have to do is adopt good driving habits and avoid distractions at the wheel—and if you encourage others to do the same, you’ll benefit all the more. If the number and cost of claims went down, insurers would be more confident and rates would soon start to drop again. Road safety awareness initiatives by employers can also have an important effect.
Until your good driving habits pay off, you can always count on discounts from your insurer. The zero claim discount, installed anti-theft system discount, and low mileage discount are all good ways of protecting your car. Talk to your representative to see if one of these discounts applies to you.