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The Impact of COVID-19 on Canadian Insurance Shopping Behaviour

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It’s no surprise that the COVID-19 pandemic has changed the way Canadians shop for goods & services. From the boom in Amazon Prime subscriptions to the surge in UberEats orders, there’s one more industry that has also been impacted by the rapid growth of online shopping – the insurance industry. 

In November of last year, Ratehub.ca surveyed 1,500 Canadians for our 2021 Digital Money Trends Report, so we could better understand the nature of the financial services industry in Canada. Specifically, when looking at COVID-19 and its impact on the insurance industry, we found a shift in the way Canadians purchase their coverage. 

Pre-pandemic vs. future insurance shopping behaviour in Canada

According to survey data, the pandemic has prompted an increase in online shopping for insurance policies. Only 35% of Canadians claimed to always research and compare rates online before the start of COVID-19, but this number is expected to grow as 42% of Canadians believe they will do so in the future. 

Additionally, insurers can expect fewer policy renewal opt-ins in the future. Prior to the start of the pandemic, 33% of Canadians claimed to let their insurance policies renew on their own without any research. However, when asked about post-pandemic shopping habits, this number decreased by a full 7% – only 26% of Canadians will opt for an auto-renewal without additional research in the future.

 

Although this means that more Canadians are taking measures to ensure they’re getting the best rate possible, there’s still a large number of policyholders that aren’t. Similarly, a recent poll from the FSRA (Financial Services Regulatory Authority of Ontario) revealed that only 30% of Ontarians always look for the lowest rate when shopping for car insurance. And while a small percentage (27%) of Ontarians shopped around for auto policies in the last year, almost half of the respondents claimed it took just a few minutes to receive a quote.

Why should you shop around instead of auto-renewing? 

So what’s the big deal with auto-renewing your insurance policy? Sure, it’s convenient, but you could be missing out on hundreds (if not thousands) of dollars in savings. Different insurance companies offer different rates – even if the coverage is near-identical – so if you don’t look at all your options, there’s a decent chance you’re paying more than you need to. 

As an example, let’s take a look at the potential savings of a hypothetical driver who compared Toronto car insurance quotes with Ratehub.ca’s calculator. While the lowest rate offered by an insurer was set monthly at $107 (or $1,284 annually), the driver also received a monthly premium of $524 (or $6,287 annually) – for the same types of coverage, limit, and deductible. In this specific case, over $5,000 in potential savings can be achieved by selecting the cheapest option available. 

Lowest rate

Highest rate

Potential savings

$107/month

$524/month

$417/month

$1,284/year

$6,287/year

$5,003/year

 

Methodology: The table above outlines potential premiums for a 30-year-old female living in Toronto with a clean driving history. The policies are set for a 2022 Honda Civic with $1 million in liability coverage and a $1,000 deductible for collision and comprehensive insurance

READ: The hidden cost of your auto insurance renewal

And the same goes for home insurance – when looking at a hypothetical homeowner who compared Ontario home insurance rates with us for a property in Markham, potential savings racked up to over $1,500 for the year. The lowest quote offered for a home insurance policy was $62 per month (or $745 per year) while one insurance company charged a premium of $188 per month (or $2,259 per year) for the same types of coverage, limit, and deductible. 

Lowest rate

Highest rate

Potential savings

$62/month

$188/month

$126/month

$745/year

$2,259/year

$1,514/year

 

Methodology: The table above outlines potential premiums for a detached, one-family house in Markham, valued at about $532,000 in replacement cost. The property is approximately 2,000 square feet large while the policies include $2 million in personal liability coverage, a $1,000 claims deductible, and flood insurance (sewer-backup and overland water endorsements). 

Why do different insurance companies offer different rates?

You may be wondering why insurance premiums can range so drastically across each provider, even if you're essentially purchasing the same policy. The reason for this is because each insurance company uses its own formula to quote its customers, but your premium is typically influenced by factors in these three categories:

  • Personal risk/cost of claims – This includes your individualized risk factors that determine your likelihood of making a claim, as well as how expensive your claim could be. For example, auto insurers factor in your age, vehicle, and driving history while home insurers look at your property’s rebuild value, construction, and location. 
  • Insurance industry risk/cost of claims – Your premium can also be influenced by external factors that are completely out of your control. Insurance companies look at the risk of the overall Canadian insurance landscape, and an increase in past claims or future, projected claims can inflate the cost you’ll be paying. Recently, the average cost of home insurance has seen a substantial increase, partially due to climate change (i.e. the flooding in BC). As well, industry factors that increase the cost of rebuilding homes – such as supply chain issues, inflation of materials, expensive building permits, and labour shortages – have contributed to higher home insurance rates across Canada. 
  • Insurance company operations – Your insurance rate can also be influenced, simply by the way an insurance provider does business. The cost of business operations and financial goals vary across all insurers which can play a large role in the premiums they charge their customers. 

Every insurance company may weigh these factors differently when calculating your premium, creating a large range in rates across the providers. And insurers typically also offer their own special discounts, such as auto and home bundling, which can widen the pricing gap even more.

Tips on shopping for insurance online

Researching and comparing insurance quotes online might seem difficult if you don’t know where to begin, but we’ve got you covered. By taking less than five minutes to provide us with a few details, we can calculate customized quotes for various types of coverage including, auto insurance, home insurance, life insurance, travel insurance, and business insurance

One of the biggest advantages of using Ratehub.ca to compare insurance quotes is that you’ll only need to enter your information once, but you can receive rates from multiple insurance companies across Canada in just a few minutes. And we’ll make sure you’re comparing apples to apples – you won’t be viewing car insurance premiums for a policy with the minimum, required coverage in comparison to one that has every possible endorsement added. 

After receiving your quotes, we’ll also connect you with a licensed insurance broker who can guide you through the process of purchasing the policy. That way, you’ll be able to understand the ins and outs of your policy and ensure you’re getting exactly the coverage you need.

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Switching insurance companies – what you need to know

After shopping around for new insurance quotes and selecting the best one for your needs, the next step is to switch insurance companies, provided you’re currently with another insurer. To make sure you’re doing it correctly, we have a post that answers all the frequently asked questions: Switching insurance companies – how and why to do it. But as a quick summary, here are a few things you should know when changing your choice of provider:

  • Make sure your new policy is ready to go before cancelling your current coverage – the policy dates should align so there’s no gap. You wouldn’t want to cancel your auto insurance too early as you won’t be able to legally drive it. And if your home is uninsured while you’re still shopping around, you won’t be able to make a claim for events, such as theft and fire, during this time.
  • It’s a good idea to notify your current insurer of the switch in writing, on top of any other requirements your provider requires. You should also double-check if any formal requests or documents need to be completed to ensure the cancellation is official.
  • The best time to switch providers is at the time of renewal, as cancelling your insurance mid-policy can potentially lead to a financial penalty. Not all insurers offer a refund and those that do may not offer the full amount or charge an additional fee. So if you’re planning to switch insurance providers mid-policy, read the fine print to make sure the savings are worth any financial repercussions. 

The bottom line

The pandemic has altered the way Canadians purchase their coverage as more policyholders are prompted to research rates, compare quotes, and avoid auto-renewals. However, there are still a large number of Canadians who won’t be taking advantage of online insurance tools, such as Ratehub.ca’s quote calculator. By taking just a few minutes out of your day to shop around, you can ensure you’re getting the lowest rate possible with the best insurer to secure all your coverage needs. 

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