Big Jump in 2019 Insurance Renewal Premiums
As most Ontarians are finding in early 2019, their 2019 insurance renewal premiums are proportionally more expensive than their 2018 premium. Premium increases have been applied to consumers across Ontario, regardless of insurance carrier.
Why are these premium increases so large? Clients tell us all the time “I have not had a claim.” “I have been a loyal customer for many years.” “They tell me I’m a valued customer. Where is the insurer’s loyalty to me?” These are all valid, reasonable, excellent questions that require answers.
First, insurers must apply to the provincial government regulator, Financial Services Commission of Ontario (FSCO), to raise premiums. During the application process, formal applications are presented to the regulator, providing justification for their ask. The regulator may approve as requested, reduce the requested increase or deny approval.
Brokers have no jurisdiction or involvement in this process.
For 2019, the provincial government has approved across the board rate increases for auto and homeowner policies in the range of 6% – 20+%. These are large increases. Why are they so large? Pay cheques have not gone up that high or as fast. Inflation is not that high!! Good questions!!
Factors Contributing to Rate Increases
Here are some contributing factors that I hope improve your understanding. For property coverages, the frequency and severity of weather-related claims (losses) has risen to numbers insurers have not seen before. Claims costs have skyrocketed. Water damage due to storm and flooding is now the #1 cause of property losses, not fire as in times gone by.
Climate change is real and having an affect on all communities. We are seeing larger and longer storms than ever before. Infrastructure in communities is old, taxes have not been allocated to re-building infrastructure and as a result flooding is occurring in areas that have not flooded before. Housing development has exploded in some communities. Sump pumps or sewer back up values were once only found in rural communities. No longer. Given the increased frequency and severity of sewer back up and overland flooding claims, Underwriters are now requiring upon renewal, in certain urban areas, that homeowners have these devices professionally installed to reduce or mitigate the risk of flooding and damage to property.
Wild fires have burned across Canada destroying large areas of property. “But I don’t live in such an area affected by flooding or fire.” That may be true – but the foundation of insurance is that the “premiums of the many, pay for the losses of the few.” This is still the case, only more premium money must be collected and placed into loss reserves to ensure the monies are available to pay claims in the event of future claims. This is the main role and concern of the provincial government regulator (i.e. that sufficient monies are available to pay claims).
Auto insurance – a similar scenario – has seen an increase in frequency and severity of road traffic accidents. The number one cause of accidents is distracted driving. To address the problem, effective January 2019, the provincial government imposed huge fines and suspensions if you are caught texting, talking on phone, etc., while driving. Insurers have also adopted a pro-active deterrent approach.
Premiums have increased to pay out to repair damages and personal injury claims to victims of these accidents and to repair their autos. New autos are not simple machines to repair anymore. They are loaded with electronics and computerized equipment that is expensive to repair. This means rising repair costs. Insurers are looking to collect extra premium to cover these costs.
How Mumby Can Support You
At Mumby, we search markets routinely, seeking the BEST COVERAGE for the BEST PRICE for our clients. You can and will find CHEAPER priced insurance. If PRICE is the only criteria you have for a purchase decision, then you will be successful obtaining cheaper insurance.
However, it will not be the BEST COVERAGE for that price. We ensure you have the BEST COVERAGE – our insurers currently offers some of the best rates in the industry. Quote after quote favours our insurers on price and coverage. We make sure all available discounts are granted. If you go elsewhere for auto or home, members of our programme automatically lose the combined discount of 15%. Additionally, in the event of a claim, Mumby actively advocates for our clients with insurers, making sure they receive the benefits of their coverages for which they bargained and paid premium.
If you have received a large rate increase, we are always happy to discuss it with you. Send me a message using the contact form below!