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28.9% of Canadians Have Modified Their Insurance Coverage Due to Inflation

For some Canadians, it seems every time we adapt our viewpoint to adjust for rapidly rising inflation, it hits us with another surprise. The next one coming for you might be the pricing of your renewal package on your insurance policy. According to CanadianUnderwriter.ca, as of Q3 2023, personal auto premiums in Canada increased 7.5% year-over-year, and home insurance premiums increased 7.5% on average year-over-year.

 

With inflation in Canada rising 16.3% between May 2020 and December 2023, there are few logical reasons to expect insurance rates to remain the same. Insurers earn profits on the margin between premiums paid and the cost of the claims they receive. Automobile values, the cost of replacement parts, and home building/repair costs all factor into their underwriting equations, and each of these costs has soared in price. 

Add in rising auto theft – Ontario and Quebec saw a 48% increase in vehicle theft in 2022, and 2023 data looks no better – as well as a record year for catastrophic weather events, and rising premiums seem inevitable. 

Canadians are Tackling Monthly Bills in Every Form, Including Insurance

The LARi Insight inflation survey highlighted some key consumer trends arising from Canada’s inflation growth. Many Canadians are increasing their focus on debt management and/or reducing their emergency fund contributions. As we zoom in on insurance, it’s clear that some Canadians are taking steps to reduce costs here as well. Of more than 1,200 survey respondents, 12.6% had decreased their insurance coverage to reduce expenses.

 

It’s still uncertain how pervasive this trend will become. The majority of Canadians (64% according to survey by ratehub.ca) simply let their car insurance policy auto-renew. As a once-a-year review window, insurance inflation is less noticeable than other consumer spending areas that have Canadians on high alert, such as rising food prices

And while our survey indicates that 27.6% of Canadians are spending less on non-essential items, and 22.8% are budgeting more carefully, will their budget vigilance be motivating enough for them to shop around at renewal time?

9.9% of Canadians Have Changed Their Insurance Coverage or Providers Due to Inflation

Let’s face it, switching providers – be it a cell phone plan, bank account, or insurance policy – can be a client service headache most people would rather avoid. Not surprisingly, 51.8% of our survey respondents indicated there was no change to their insurance due to inflation. But 9.9% of our respondents felt sufficiently motivated to wade in and either change their policy or provider as a result of rising inflation. The reward for some diligence and shopping around can be significant – there are wide variations in the insurance quotes available from Canadian providers.

6.4% of Canadians Have Increased Insurance Coverage Due to Inflation, While 12.6% Have Decreased Coverage to Reduce Expenses 

Our survey did not go into the specific insurance types (auto, home, life, etc.), so our observations in this area are limited to generalities. Rising inflation, and an increasing cost of living, limits the replacement spending power that all types of insurance essentially provide. For example:

  • Rising costs of vehicle replacement and damage repair may surpass the coverage levels that were sufficient a few years ago.
  • Similarly, home repairs (e.g. storm-related damage) will come with a costlier price tag
  • Life insurance, calculated to provide a certain quality of lifestyle for beneficiaries, won’t go as far due to rising inflation costs

For life insurance in particular, normally the recommendation is to revisit your insurance coverage when significant life changes occur (a new baby, divorce, retirement, etc.), but our recent years of uncharacteristic inflation increases may be a significant enough change to warrant a review.

7.2% of Canadians are Considering Changes to Their Insurance Coverage Due to Inflation

Based on this statistic, and the others illustrated above, we expect that insurance renewal packages will be more carefully inspected in 2024 than in previous years. Many Canadians have told us they are concerned about their financial future, and their ability to earn a salary that is sufficient to keep up with rising inflation.

 

Rounding out our survey results, 12.1% of our survey respondents chose “Not Applicable / I do not have insurance”.

Build A Financial Plan That Beats Inflation

Beyond our research and information, at LARi Insight we aim to equip Canadians with information, advice and tools to help plan a better financial future. Get ahead of any insurance renewal decisions by mapping your budget using our budget calculator, assessing your life insurance needs, and comparing your salary growth to Canada’s rate of inflation

The Financial Impacts of Canadian Inflation

Explore our complete coverage, with original market research and analysis from LARi Insight.

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