There is a paradox happening at the moment in the auto insurance industry. Gas prices are tumbling, but car insurance premiums are actually rising at the same time, so while Canadians are saving money on gas they are handing it back out to insurance providers.
This is a global phenomenon, but it is arguably exasperated in Canada and the country’s most populated region Ontario because the nation’s economy is so heavily reliant on oil. It is the chief export in Canada and the resources sector has been hit hard by declining prices for oil per barrel, with Canada losing out in terms of internal and external sales.
Tens of billions of dollars will be saved by drivers throughout 2015 as oil prices fall, something that has had a negative effect on the overall economy and the Canadian dollar, but is benefitting drivers at the pumps. This would be a dream scenario for motorists in Ontario accept for the fact that insurance rates continue to rise, an unwelcome result considering Ontarians already pay more for their auto insurance than anyone else in the country.
Is this some nefarious plot by insurers? Unfortunately it is not as easy as that and it actually comes down to the way in which insurance providers calculate premiums. Insurers base all of their costs off statistics, something few consumers understand or even know about.
Researchers have found that it is statistically more likely that more fatal accidents occur when gas prices are down. This seeming anomaly stems from the fact that lower prices for gas result in more drivers on the roads and then more accidents because of the increased traffic flow. The link seem may tenuous, but car insurance companies react to such ebbs and flows and the result will be premiums that may be 4 per cent higher than they were this time a year ago.
If you are already during a policy period and not due for renewal you are unlikely to be affected by this development as oil prices and insurance rates may even out. However, most industry analysts suggest that the per barrel price of oil will continue to tumble through to the end of this year. Whether insurance premiums will keep moving in the opposite direction remains to be seen, but it is something those taking out policies in the near future will need to consider.