How auto rates are set

Know your auto policy

A car, whether right off the assembly line or new to you, can be one of the biggest purchases you make. Insurers assess many factors – including your driving record – when calculating your premium. Your insurance rates are also determined, in part, by the type of car you drive. Generally, the harder your car is to steal and the less expensive it is to repair, the less you pay for insurance.

Auto insurance is regulated and legally required in each province and territory in Canada.

Each province and territory sets mandatory auto coverage requirements that you must purchase to legally operate your vehicle.

Factors that determine your rate

When calculating your insurance premium, some of the factors that auto insurers may consider include:

Vehicle make, model, year and safety features
Your age and gender and marital status
Your driving and insurance history, which includes claims and convictions, and may include other factors such as whether or not you have taken driving training
How long you have had your licence
Where you live
How frequently you drive/how many kilometres per year
If your car is also used for commercial purposes
Your personal driving history and that of other household drivers who are listed on your auto insurance policy
Your current driver’s license class
Market conditions

How market conditions impact auto insurance rates

Like any product market conditions affect the price of auto insurance. Inflation is one of many factors taken into consideration by insurers. Some other market conditions that contribute to the cost of your auto insurance premium include:

The cost of repairing damage after a collision or loss event. Windshields with built-in rain sensors are more expensive to replace than those without. Increased technology in newer vehicles also increases the cost of repairs. In addition to high-tech parts, insurers also factor in the cost of appraisals, labour, towing services, and potential rental vehicles.
Changes in the marketplace. When goods, services, and labour are in high demand and supplies are low, prices rise. In addition to repairs, your auto insurance also provides coverage for bodily injury liability. Auto insurers adjust rates to ensure they can cover future claims.
Increasing rates of theft and fraud. Auto theft is on the rise in Canada. A staged collision can involve exaggerated injuries, premeditated collisions, medical services fraud, false property theft, and more. Theft and fraud are multi-billion-dollar problems that are increasing the cost of auto insurance for all drivers. To learn more about how the industry is working to fight fraud, visit Équité Association.

Generally, the less likely your car is to be stolen, damaged or in a collision as well the less expensive it is to repair, the less you will pay to insure it.

Working with an insurance representative who understands your auto insurance requirements can help you choose the right coverage for your vehicle.

How the vehicle you drive impacts your insurance

SUV? Truck? Sedan? It’s not just who drives the vehicle. Insurers also consider the specific vehicle you are insuring when writing and pricing your auto policy.

A vehicle’s make, model, year, value and potential repair costs are all considered when an insurer sets a rate for your car insurance policy. Safety features including car alarms, number of airbags, collision avoidance technology and how well your vehicle protects occupants in a collision may also be considered.

The vehicle you buy impacts your insurance rate in a number of ways. Here are 3 things to consider when you’re getting ready to buy or lease a car:

Vehicles with lower-cost insurance ratings may cost less to insure. Check out IBC’s How Cars Measure Up in Canada.
Vehicles that are more likely to be stolen are typically more expensive to insure.
The Canadian Loss Experience Automobile Rating (CLEAR) system rating is built on insurance claims data. Insurers use CLEAR to assess how likely it is that a specific vehicle will be involved in a claim and what that claim will likely cost.