Toronto, Ontario -- A number of factors that have pushed auto insurance costs upward over the past five years, Statistics Canada has found.
In a new report, the government agency says a proliferation of EV on Canada's roads, the increasing complexity of vehicles and the failure of automotive sector supply chains to recover from disruptions related to the coronavirus pandemic each played a role in driving up premiums.
The proliferation of electric vehicles on Canada's roads has had a direct impact on repair costs and a knock-on effect on insurance rates. As of 2023, the average repair cost for electric vehicles reached $6,795, compared to the $5,122 average for internal combustion engine vehicles. This is because EVs tend to be heavier and more prone to airbag deployment and because battery replacement costs are substantial. Although EV repair costs are currently high, trends suggest a gradual decline may be underway.
The increase in technical complexity of all vehicles is also pushing up repair and insurance prices. New advanced driver assistance systems often require parts and expensive calibrations to operate properly. This means repairers must bill more in material and labour to fix newer vehicles.
Another major force putting pressure on insurance and auto repair prices are supply chains. During the coronavirus pandemic, the substantial disruptions in automotive supply chains led to shortages. This increased new and used vehicle prices, alongside repair and maintenance costs. By December 2024, the Consumer Price Index for vehicle parts, maintenance, and repairs had risen 22.3 percent compared to 2019. Though inflation has moderated, elevated costs are now baked into the system.
The vehicle fatality rate in Canada improved in 2022 compared to pre-pandemic levels, thanks in part to legally mandated safety features such as airbags, backup cameras, and crumple zones. However, these features increase vehicle damage during collisions and repair costs, raising the cost per claim.
There has been a notable rise in total loss claims, where repair costs exceed 70 percent to 80 percent of the vehicle’s depreciated value. By 2023, total losses made up 20 percent of physical damage claims, nearly equal to repair claims, signaling a significant shift in claim composition.
StatsCan also found some portion of the rise in insurance prices related to a surge in auto theft claims, which rose from $489 million in 2022 to $1.5 billion in 2023 in Ontario. This spike pushed the comprehensive coverage claims ratio in Ontario to a peak of 190 percent.
