A Mississauga-based insurance broker believes that the “perfect storm” of industry factors have led to significant home and auto insurance rate increases in recent time.
In a statement, broker Filip Ambroziak said that thanks to certain factors – particularly low interest rates, high claim frequency and repair costs, as well as fraud – insurance premiums had “nowhere to go but up” from the years 2018 to 2020.
Ambroziak also gave a short primer on each factor driving insurance premium increases.
The broker noted that the recent trend of low interest rates “may be great for the homeowners who can save on their mortgage payments,” but not so much for cash-heavy businesses such as insurance. Ambroziak said that for the last several years, most insurance companies have been operating at an underwriting loss, and the low interest rates meant those insurers were also unable to offset their underwriting losses with investment returns.
Claims frequency and repair costs have been on the rise in Ontario, local broker Ambroziak observed. He also found because the GTA is welcoming a large number of new residents each year, the number of homes and cars in the region has also increased – and with that increase has come even more insurance claims.
Ambroziak made mention of the increase in auto repair costs, particularly for vehicle model years 2016 and onward. New automobile technologies have made vehicles safer and more convenient, but at the same time even more expensive to repair. The broker cited an instance wherein a small windshield claim cost upwards of $1,600 to replace due to the display technology in the windshield.
Fraud has also been a major driver in insurance rate increases, the broker noted. Ambroziak defined two types of fraud: soft and hard. Soft fraud is when the claimant exaggerates a real claim for a bigger payout (i.e. claiming on a damaged 55” flat screen TV when the device was really 43”), while hard fraud refers to purely fraudulent claims.
“Both types of fraud are one of the main reasons insurance has been increasing every year,” Ambroziak said, adding that there are fraud rings in the GTA “who defraud the insurance companies regularly.”
Ambroziak concluded his statement with a prediction that there will be “multiple” rate increases in 2021 and the next few years after. He noted that the GTA remains a “very attractive place to move to,” and that immigration is not slowing down despite the pandemic. The broker also forecasts that the insurance industry will remain in a hard market for another 12-18 months.
