Why Home and Auto Insurance Rates Are on the Rise
In recent times, you may have noticed a rise in home and auto insurance rates across Canada. As Economical explains, there are many factors that are contributing to this, such as changes in climate and lifestyle. In addition, improvements in technology are leading to an overall increase in insurance premiums.
Here we look at some underlying reasons why insurance rates are climbing.
We hate to point the finger at what is becoming the scapegoat for many of the world’s woes. However, climate change is one of the reasons we are seeing higher premiums for insurance. Severe weather increases risk for damage to cars and houses thanks to everything from winds to floods and forest fires to temperature swings. More technologically-advanced homes and cars are more vulnerable to damage as Canada experiences more extremes that contribute to increased risk, which in turn pushes premiums upwards. Even extreme temperature swings in the winter can lead to sudden snow and ice melting, which usually slowly melts. When the temperatures rise quickly all that water has nowhere to go which increases risk for everything from roof leaks to flooding.
Improved House Features
We are seeing increased housing and home insurance prices, not just because of natural supply and demand, but also because of more homes being built with higher-end features like pools and hot tubs. The more features like these that a home has, the higher the replacement costs. As well, things like pools and spas increase the risk for liability claims. Combine this with extreme weather, and you are looking at increased risk for damage AND higher costs to replace all the fancy features and luxuries in homes.
Demand for More Space
People are demanding more livable space in their homes. From home theatres to extra bedrooms and in-law suites to man caves, these additional spaces increase the areas that have to be refurbished and/or replaced by insurance companies.
Rising premiums are in response to the growing need for insurance companies to replace the costly items stored in these spaces like expensive sound systems and massive TVs. Let’s consider the growing trend for people to work from home. Computers and other office equipment, along with increased risk for home accidents, also increase the risk of claims. Again, we have to add extreme weather into the mix. This increases chances for damage due to flooding in garages and basements and severe weather-related damage to roofing for attic renovations. The ways we use our homes’ space have increased the risk for expensive claims and thus the need to increase premiums.
Aging Municipal Infrastructure
Many areas in Ontario suffer from ageing municipal infrastructures that increase the risk for floods and sewer backups. You read about these issues all the time. Ongoing flooding in some areas of Ontario makes it difficult for some homeowners even to secure flood insurance for their homes.
Eco-Friendly Building Materials
Investment in costly environmentally friendly materials and components like solar panels and energy-efficient windows and doors costs more to repair or replace. Even something like high-efficiency laundry machines adds to the costs of replacement for insurance companies. Also, something like solar panels is more vulnerable to damage due to severe weather such as wind, ice storms, etc., which again increases the risk, which increases premiums.
Modern Vehicle Features
If you own a newer model vehicle, you probably bought it thanks to all the modern features. This can include a long list of costly components, including:
- Modern high tech windshields connected to driver assistance systems
- Sensors in the bumpers
- Computer systems that operate everything from security to warnings systems
- Sensors in mirrors‘
Thanks to computer systems, straight-up repairs no longer exist. Everything has to be recalibrated, which takes longer, requires more skills and costs more.
Smart and Automated Features in Vehicles & Homes
The more advanced vehicles have automation features such as adaptive cruise control and Autonomous Emergency Braking systems that are very costly to replace and repair. While some might argue this should reduce insurance because it reduces the risk of accidents, the reality is that the replacement costs are far more expensive. Smart home features also add expensive components that need to be replaced or repaired.