As lockdown measures caused by COVID-19 continue in Canada, many people remain unsure about what the future holds. That is especially true for the cost of home and car insurance. Through the pandemic, car insurance rates fell, giving motorists some financial relief. However, homeowners have not been so fortunate because home insurance prices continue to rise.
What role has the COVID-19 crisis played in impacting insurance rates, and what can auto and home insurance customers expect in 2021?
Disparity in Rates
In late January, Applied Systems released its fourth quarter and year-end 2020 results covering Canada’s insurance industry.The Q4 2020 results show average auto insurance premiums fell year-on-year (-2.6%) while average home insurance costs increased (3.6%).
It was a similar story quarter-on-quarter, with personal auto rates falling and personal property rates rising compared to Q3 2020. In other words, customers are paying less for car insurance and more for home insurance than they previously were.
What Role Does COVID-19 Play?
What’s interesting about the disparity in rates between personal auto and personal property is the various reasons why the trends are occurring. In terms of car insurance, there is a direct line between falling rates and the COVID-19 pandemic. That same line cannot be drawn for home insurance rates, which have grown steadily for years.
Declining auto insurance rates were a rare financial respite for Canadians who saw their earnings potential fall and debts increase during the COVID-19 lockdown. Most markets in Canada saw rate hikes before the pandemic, but during the crisis, rates have softened. As businesses closed and people were forced to stay at home, many motorists were driving less.
With the risk of collisions decreasing and fewer vehicles on roads, some insurers cut their premium costs. Furthermore, the auto insurance industry introduced a host of temporary relief measures, including rebates and discounts, to help customers through the crisis.
Homeowners weren’t so lucky because the factors affecting a rate increase were already happening and continue, despite COVID-19. Climate change and severe weather are driving home insurance rates upward. The ripple effect bad weather has on home insurance premiums is unlikely to reverse.
ASwiss Re Institute report shows 2019 was the second warmest year in Canada inthe last decade. Floods, wildfires, and winter storms are increasing in frequency and severity. Insurance companies pass the costs of covering homes that are more at risk to customers in the form of higher premiums.
Predictions For 2021
With some clear trends emerging in personal auto and personal property insurance rates through 2020, many Canadians are asking what 2021 has in store. Will auto insurance rates continue to soften? Will home insurance rates level off or continue an upward march?
Unpredictability defines auto insurance in some Canadian markets, most notably in Ontario. There’s no question Canada is still amid the COVID-19 pandemic, and as measures around social distancing continue, there’s a chance insurance companies will keep rates low. Still, there are no guarantees, and it’s just as possible the market will return to normal, and rates will increase.
Canada is launching a vaccination program that could increase traffic volumes as lockdown measures ease. If the vaccination program gathers pace, expect insurers to respond by starting to push rates back up.
Prime Minister Justin Trudeau says the vaccine will reach most Canadians by September. In the meantime, the pandemic will continue to affect the way Canadians live and how they travel. Insurance companies are likely to take a pragmatic approach and monitor driving trends throughout the year, adjusting rates if necessary.
If auto insurance is unpredictable, home insurance rates are becoming disappointingly predictable, and they are heading upwards as more Canadians continue to work from home. Other factors causing increasing home insurance rates have been present for years and include:
- Worsening weather conditions
- Bigger homes
- Homeowners have more belongings to protect
Because these factors may continue, and in some cases, become more common, home insurance rates may continue to rise in 2021.
How to Find Affordable Coverage
Despite the softening of car insurance rates, buying coverage for a vehicle remains unaffordable in some parts of Canada. As for home insurance, homeowners will keep feeling the pinch as rates rise. It’s worth noting auto insurance is mandatory in Canada for all drivers, but home insurance is not. More accurately, people who own their homes do not need insurance, but coverage is required to get a mortgage.
Does that mean homeowners should avoid obtaining insurance if they own their homes? No. The cost of rebuilding or repairing a house far exceeds the cost of insurance. That’s why home insurance is one of the best investments a homeowner can make, despite the frustration of increasing rates.
Saving cash on auto and home insurance is something most people want to do. Comparing quotes online is an efficient and easy way to find the most affordable rates for your insurance needs.