Car insurance is a complex topic, but let’s be honest, most Canadians just want to know how much it’s going to cost them, why it’s going to cost them so much and how they can score a better rate. Let’s dig into the data and break down the state of car insurance in Canada.
- About 27 million (Statista 2018) Canadians hold a registered driver’s licence – that’s more than 8 out of 10 adults!
- Car insurance is a big business in Canada with $24.19 billion net annual premiums (Statista 2019)
- British Columbia pays the highest car insurance annual premiums at about $1,83o a year (IBC)
- Nearly 10,000 Canadians are injured in car collisions every year (Statista 2018)
- Manulife Insurance is the largest insurer in Canada with total assets of nearly $810 billion (Statista 2019)
*All fast facts figures courtesy of Statista (2018/2019) and Insurance Bureau of Canada (2018/2019)
Before we examine the cost factors, let’s see how much interest in car insurance has changed since the pandemic.
Driving comes to a screeching halt during the pandemic
Canada’s economy effectively came to a stop halfway through March to flatten the COVID-19 curve. A side effect was highways were smooth sailing due to the new stay-at-home orders. Many Canadians are now planning to work from home indefinitely or commute much less than they were before.
This new reality has seen interest in car insurance skyrocket recently. Canadians want to cut costs for a car that’s sitting in the driveway more than it’s driving on the roads.
In fact, when we analyzed SEMrush data on Canadian traffic to the websites of five of Canada’s popular auto insurance providers, there was a sharp rise in interest from the pre-pandemic period in February 2020 to July 2020. In about 6 months, an average of 48% more Canadians were searching for car insurance.
The Co-Operators saw the sharpest increase in interest at 77% July over February, with Aviva in second place with 59% and CAA Insurance rounding out the top three at 44%. Wawanesa and Intact noticed 35% and 25% respective increases in traffic to their websites.
Comparing the same insurers from July 2019 to July 2020, we saw a 56% average increase in web traffic.
This is pretty significant considering that while insurance interest may ebb and flow at certain times of the year, this comparison looked at the summer period just a year apart and indicates Canadians are looking for a change now much more than they were before.
The Co-Operators took the top spot at (88%), followed by CAA (63%), Intact (56%), Aviva (39%) and Wawanesa (34%).
Top car insurance myths
Car insurance myths are so prevalent that Canadians are confused about what factors really influence what they pay.
Before we break down what influences car insurance rates, let’s bust some of the most prevalent myths. TD Insurance breaks down some of the biggest car insurance myths, but here’s the TL;DR.
Is it true that the following factors impact the price of your car insurance?
- Colour of your car – FALSE
- Is a two-door car more expensive than a four-door car? – FALSE
- Make and model of your car – TRUE
- Where you live – TRUE
- If you are under 25 – TRUE
- If you have had a parking ticket – FALSE
- If you have had a speeding ticket – TRUE
- You don’t have to pay a deductible if the accident wasn’t your fault – FALSE
- If you are in a car accident in the U.S., your insurance won’t cover you – FALSE
Car insurance costs from coast to coast
Where you live hugely determines what you pay for car insurance – with rates varying widely coast to coast.
The average cost of annual car insurance premiums in Canada is $1,142.70 (Insurance Bureau of Canada, 2019).
British Columbia has Canada’s most expensive car insurance, at more than $1,800 on average annually. B.C. is known for its high percentage of luxury cars, which raises rates for the average driver. This was such an issue that in 2016 the government worked with the industry to change the rules. Now cars valued at more than $150,000 need to be insured privately.
Ontario comes in a close second at more than $1,500 a year in annual premiums. These expensive premiums are due to a higher frequency of auto claims and crime in Ontario. Over the last 10 years, 13 out of the top 15 cities with the highest frequency of claims were located in Ontario, according to an Allstate study.
Ontario also claims the highest insurance fraud rates, costing the industry a whopping 1.6 billion a year (2017).
Alberta comes third for the highest average premiums, but insurance expenses only account for 2.7% of disposable income, which means Alberta is the most affordable province for car insurance.
On the other end of the spectrum, Quebec has the lowest average premiums in the country due to a favourable combination of public and private insurance and a unique no-fault system for accidents that limits liability, keeping costs low.
The Prairie Provinces and the Maritimes make up the middle of the pack with average car insurance premiums ranging from about $800 to $1,200 a month.
Age isn’t just a number
Unfortunately, with car insurance, age is not just a number. It’s no secret Canada’s youngest drivers pay the highest rates since they are considered the highest risk customers.
According to Transport Canada (2018), Canadians aged 15-24 are most likely to be injured in an auto collision (29,764), closely followed by those aged 25-34 (28,819). Injuries lessen dramatically for those aged 35-44 (23,269) and drop slightly more for those aged 45-54 (22,159) and lower still for those aged 55-64 (18,808). Canadians aged 65+ saw the lowest rate of injury at just 17,378 annually.
Interestingly, Canadian teenagers are least likely to hold a valid licence (approx. 3 million aged 16-24) but are most likely to be injured. While seniors comprise the largest group of licensees (nearly 5 million for 65+), they are simultaneously the least likely to get injured. In fact, 55% of Canadian seniors want to keep their driver’s licence past the age of 80.
Considering the direct correlation between youth and high risk, it makes sense car insurance rates will decrease with age.
While auto insurance rates do tend to get cheaper as you get older, sometimes there is an opportunity to negotiate new lower rates at key milestones. Bottom line, ensure you routinely compare providers as you mature to avoid leaving money on the table each year.
Pay as you go?
One of the hottest topics in car insurance is mileage-based or pay-as-you-go insurance. With mileage-based insurance, how often and how safe you drive determine the total cost. If you qualify, pay-as-you-go insurance can save you quite a bit of money in the long term.
Usage-based insurance was first introduced to Canadian drivers in 2013 and is now offered by popular insurers like Desjardins, Intact, Allstate, Co-operators, belairdirect and TD. Recently, CAA released Canada’s first mileage-based insurance aimed at those who drive under 9,000km a month.
Typically each customer will have a device installed on their car to monitor either distance driven (telematics) or how they drive (i.e. no heavy braking or speeding) and will be charged a set base rate (decided by a number of factors) and then pay for additional distance or receive discounts for safer driving behaviours.
Cost savings comparison
We compared the six major Canadian insurers providing pay-as-you-go auto insurance and found they had an average savings of up to 32%.
CAA explained users of their MyPace mileage-based insurance could expect to save up to 70% compared to typical auto insurance for very low-mileage drivers, assuming they drove 1,000km or less. Allstate’s Drivewise provides up to a 30% discount, while Desjardins’ Ajusto, Intact’s my Drive and TD’s MyAdvantage all offer up to 25% savings. belairdirect’s automerit offered up to a 15% discount for safe driving.
The reason pay-as-you-go car insurance is likely to see even more demand now is due to the millions of Canadian workers who are becoming virtual workers for the first time in their careers, while many others are shifting to a more flexible schedule that will see them spend less time in the office in future. This is a trend that likely peaked during the economic shutdowns but one that many experts see persisting, even when COVID-19 is firmly in Canada’s rear-view mirror.
The service makes the most economic sense for occasional drivers like retirees, virtual workers and drivers who also use public transit often.
Thinking about switching car insurance providers? Ensure you get and stay educated to get the most bang for your buck. Check out our comprehensive car insurance guide to learn more and to find the right car insurance for you based on your own unique situation.
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