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How does inflation affect insurance in Canada?

Rising inflation rates can lead to higher insurance premiums. To counteract the added expenses, compare car insurance quotes with us to find the best rate today.

Inflation has become a part of everyday life in Canada. Over the past five years, prices have gone up 18%, making it harder to afford food, housing, and everything in between.

While you’re probably used to seeing the effects of inflation on your grocery receipts, you may also have noticed an unwelcome spike in the amount you’re paying for home and auto insurance. Just how much more are Canadians paying for insurance? And what can be done to counteract the trend of rising insurance prices?


Key takeaways on inflation and your insurance

  1. Inflation has driven up insurance premiums in Canada, with auto and home insurance costs rising by 13.3% and 10.9%, respectively, over the past year due to increased living expenses.

  2. Rising claims frequency and costs, fueled by factors like natural disasters and car thefts, are key drivers behind the surge in insurance prices.

  3. Consumers can mitigate rising insurance expenses by opting for higher deductibles, reviewing and adjusting coverage, seeking discounts, avoiding unnecessary claims, and comparing quotes online for better deals. These strategies can help control the impact of escalating insurance costs.

How much more are Canadians paying for insurance?

Insurance premiums aren’t immune to inflation. In fact, they make up part of the consumer price index, Canada’s best tool for measuring inflation. As the price of gas, groceries, and other essentials have risen, insurance costs have gone up just as much.

According to Canadian Underwriter, auto insurance premiums are up 13.3% since this time last year. That means a car insurance policy that cost $1,500 last year would jump to $1,700 this year – an increase of about $17 per month. Home insurance premiums have risen 10.9% in the same time frame. 

The good news is that the trend seems to have paused, at least for now. According to Marsh, a global insurance consulting firm, insurance rates in Canada fell by 2% in the first quarter of 2024. That makes sense, as CPI inflation is easing off and getting closer to the Bank of Canada’s target of 2% per year.

Also read: How has inflation impacted home insurance rates in Canada?

Why are insurance prices up in Canada?

Insurance prices are up for two reasons: Canadians are making more claims, and those claims have become more expensive to pay out.

The increase in the number of claims is driven by a few factors. Natural disasters are becoming more commonplace, with more Canadians affected by powerful storms, floods and wildfires. As these risks increase, insurance companies need more cash to pay for the damage.

Also read: What to know about insurance during wildfire season

Meanwhile, auto insurance claims are up as an epidemic of car thefts remains unchecked. According to Équité Association, a Canadian insurance industry advocacy group, auto thefts tripled from 2018 to 2022, and a car is now stolen in Canada every five minutes.

Also read: The top 10 most stolen vehicles in Canada

Insurance companies are also facing an increase in the cost of the claims they have to pay. All those stolen cars have to be replaced, and the average price of a new car has risen to over $66,000. Insurers paid a total bill of $1.2 billion for stolen cars in 2022, a figure that’s only going to rise.

Insurance companies are paying more to settle home insurance claims as well. Inflation has increased the cost of building materials and labour, leading to higher costs that are being passed on to consumers.

Will insurance prices continue to rise in 2024?

While the rate of inflation has fallen from its peak, it’s a safe bet that the cost of insurance will continue to go up in 2024 and beyond. The number of claims is likely to continue rising, as is the cost of paying them out, which will both lead to higher prices.

The rapid increase in prices should ease off, however, as inflation continues to come under control. Look for more measured price rises in the coming months and years.

Are you paying the best home insurance rate on the market?

Just because inflation is on the rise, doesn't mean you need to settle. Compare home insurance quotes from Canada's top providers to find your lowest rate today.

How can I protect myself from the rising price of insurance?

While there’s not much you can do to fight inflation, there are things within your control that can help to reduce your insurance costs. Consider these tips to reduce the amount you pay for insurance:

  • Choose a higher deductible. The higher your deductible is, the lower your monthly payment will be. Choose the highest deductible you can afford on both your auto and home insurance policies.
  • Select only the coverage you need. It’s a good idea to periodically review your insurance policies to make sure you have the coverage you need – and to ensure you’re not paying for coverage you can do without. Consider dropping collision coverage on older cars, and removing home insurance coverage for items you no longer own.
  • Look for discounts. Many insurers offer discounts for safe driving practices, like using winter tires during the winter. You may also be able to access discounts through your employer, alumni group, or other associations.
  • Avoid making claims. The best insurance rates go to people who don’t make claims. Practice safe driving habits and take steps to protect your property against flooding to keep your insurance rates from going up.

Compare quotes online at renewal. Your current insurance company may not be offering you the best deal, so you could be wasting money when you renew without checking prices. Be sure to compare insurance quotes online when your policy is up for renewal to find the best price for the coverage you need.

The bottom line

The cost of insurance isn’t just affected by inflation; it’s a driver of inflation. As claims become more common and more expensive, prices will continue to rise. 

Avoid paying more than you have to for home and auto insurance. Review your coverage, look for discounts, and be sure to compare insurance quotes online to get the best price for the home and car insurance you need.

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