What drives your auto insurance?

Do you know exactly what goes into your auto insurance policy? The short answer is, a lot of things. Each policy is formed around a number of variables, including ones that are simply out of anyone’s control. But what are these variables? And how do they impact your premium? In this article, we’ll look under the hood of your auto insurance policy to see what it’s made up of, and how it impacts you.

What You Drive and How Often You Drive It

While it is a myth that red cars are more expensive to insure, the make and model of your car can impact your car insurance premium. Newer models of cars often have more advanced technology, making them potentially more costly to insure.
How often you drive may also contribute to your overall premium. Drivers who frequently travel long distances for work may have higher insurance rates than those with shorter commutes. This is because a high annual mileage can increase your chances of collisions or traffic violations.

Your Experience on the Road

How long you have been driving for and any previous accidents or convictions could affect your rates. For example, having a speeding ticket on your record works against you as it demonstrates that you may be a risk on the road, often resulting in higher premiums.

Location, Location, Location

Your neighbourhood can also be a contributing factor. Due to a higher population, urban neighbourhoods can generally have more people on the road, which may contribute to more accidents. Comparatively, drivers in rural areas may have longer commute times, meaning they spend more time on the road. Your location and how you use your vehicle can contribute to both higher and lower premiums.

The Changing World of Insurance

Some factors that can affect your rates are beyond your personal control. As a result of these factors, overall auto insurance claims are becoming more frequent or are increasing in severity. These factors include the following:

• Rising Repair Costs:  As many parts of the car are now attached to sensors and wires, even a fender bender impacting the bumper can be costly. Depending on the make and model of your car, damage to the added technology can increase repair costs by up to 23%.¹
• Extreme Weather Changes: In recent years, the change in temperature has contributed to extreme changes in weather, with Canada’s climate warming twice as fast as the rest of the world.² This increase in severe weather has contributed to the damage of homes and vehicles, with $1.9 billion in insured damage accumulating in 2018.³
• More Drivers are Distracted: There was a 102% increase in the percentage of Canadians that reported texting while driving from 2010 to 2019⁴. However, texting while behind the wheel isn’t the only thing that can distract you while driving – distracted driving is defined by anything that takes your focus off the road—including talking to passengers or eating and drinking. As a result, nearly 80% of collisions and 65% of near crashes are caused by distracted driving.⁵
• Fraudulent Claims: Unfortunately, fraudulent claims are also on the rise. Each year, fraud costs an estimated $1.6 billion in false claims.⁶ These claims, typically filed for personal gain, cause rates to increase across the country.

Optional Coverage and Deductibles

Finding coverage that is a right fit for you and your needs can also ensure that you have rates you are comfortable with. Adding optional coverage can also cover you in a variety of circumstances, but they can also contribute to a higher overall rate.

Find Coverage That Works For You

By this point, you can appreciate how auto policies are very much like fingerprints in that they’re unique to each driver. The goal is to find coverage that meets your needs the best. Talk to one of our friendly representatives to find the policy that best fits you.

• 1- https://www.repairerdrivennews.com/2017/12/13/mitchell-analysis-shows-23-repair-price-increase-between-car-generations/
• 2- https://changingclimate.ca/CCCR2019/
• 3- http://www.ibc.ca/on/resources/media-centre/media-releases/severe-weather-causes-190-million-in-insured-damage-in-2018
• 4- https://pubmed.ncbi.nlm.nih.gov/33653542/
• 5- http://www.ibc.ca/on/auto/risk-management/distracted-driving
• 6- https://www.insuranceinstitute.ca/en/cipsociety/information-services/advantage-monthly/0718-insurance-fraud