Top 6 Reasons Auto Insurance Rates Are on the Rise

You rely on your automobile to get you to work, drive your children to soccer and pick up your weekly groceries. You are proud of keeping your vehicle in pristine condition and want to protect it so you make sure you have full coverage auto insurance. So, why are you looking at your most recent auto insurance policy and seeing that the rate you paid last year is no longer the same this year? How is it possible that your rate has increased when you haven’t had any accidents, moving violations or made any claims whatsoever? Insurance rates are increasing and here are some of the reasons you may not have thought of.

1. Vehicle Trends

That beautiful new SUV you just purchased has all the bells and whistles. Lane sensors, high-tech stereo, auto windshield sensors, an integrated GPS system, and outstanding 360° cameras so you can be as safe as possible. Here’s the thing, all this technology comes at a cost and when it gets damaged it is expensive to fix. When you make an insurance claim to repair damage to your vehicle, it is no longer just a simple replacement of some basic parts. Replacing these technological wonders often requires costly repairs and a recalibration of the entire onboard computer system.

2. Location

Alberta is a beautiful province to live in and we have some of the best facilities in the world. Our climate and proximity to the Rocky Mountains attract many people to our home but did you know Alberta is on top when it comes to automobile theft? This is one time when it is not better to be at the head of the class. Approximately 1 out of every 250 vehicles in Alberta were stolen in 2018. That’s a lot of missing wheels and replacing those vehicles adds up. Depending on where you live in the province, whether it be in the city or rural space, this can play a role in the cost of your auto insurance premium as well. Alberta also has a high frequency of weather-related events, such as hail, flood and wildfire. In August 2019 a single hail storm caused nearly $50 million in damage to vehicles.

3. Fraud

It’s true, there are many fraudulent claims when it comes to automobile insurance. You have heard about the person whose minor fender bender ended up in a six-digit payout from the insurance claim. Not all injury claims are falsified but these types of claims are affecting your insurance rates. When your insurance company has to pay out for these fraudulent claims, it costs money.

4. Replacement Costs

Vehicles are expensive. Gone are the days of purchasing a new car for a few thousand dollars. Now that same amount only covers the price of the wheels and tires. New vehicles can cost upwards of $50,000 to $60,000.

Let’s do some math. If your insurance premium is $1,500 per year and your new vehicle costs $60,000. It will take 40 years of premiums to cover the cost of your new vehicle. Chances are, sometime in that 40-year span you will have made an insurance claim. If the claim is for the entire cost of the replacement of the vehicle, your insurance company has paid more to cover the cost than the total amount of premiums they collected.

5. Settlements for Injury Claims

When you have been injured in an accident, you need to get help. Sometimes that requires expensive medical treatments or ongoing physical therapy. Insurance companies pay out liability claims for items related to your recovery but often pay more money than what is necessary to get you back on your feet again. Lawsuits erupt as a result of an injury accident where a legal professional is hired to act for the plaintiff. A cash settlement often is sought as retribution for the injuries but a good portion of that cash settlement doesn’t even reach the injured person’s hands; it goes to legal fees and expenses as a result of the legal claim. According to the Automobile Insurance Rate Board (AIRB), the cost of an injury claim has risen 54.2% between 2012 and 2017, from $47,000 to $73,000.

6. Distracted Driving

Distracted driving is the leading cause of accidents and death, in 2018, there were over 23,000 convictions for distracted driving in Alberta. The frequency and severity of accidents are on the rise and so are all of the associated costs.