Challenges with the Automobile Insurance Industry

The automobile insurance industry is in a current state of crisis.

 

Over the past several years, the industry has seen a drastic increase in the frequency and cost of automobile claims being made.  There has been a rise in the amount of theft and vandalism claims, hail damage from storms has been more frequent and significant, collisions are occurring more often, and liability settlements and repairs costs are on the rise.

 

The Alberta government has refused the automobile insurers’ applications for an adequate rate increase, which has put additional stress on the industry.

 

Due to the relatively low automobile premiums being paid by consumers and the high amount of losses being paid out, automobile insurers have been suffering large losses.  Many automobile insurers are taking action and putting restrictions in place to limit their automobile portfolio.  Some of the changes and restrictions that we are seeing include:

 

• reducing coverage and/or not offering physical damage coverage
• increasing deductibles
• declining reinstatements on policies that are cancelled for non-payment of premiums
• eliminating monthly payment plans or multiple payment options
• requiring that renewals be audited and re-underwritten
• suspending brokerages from writing new automobile business
• cancelling brokerage contracts

 

If you currently have automobile insurance in place, there are several things you can do to protect yourself against the current market instability:

• ensure that your payments are made on time, or ensure that you have sufficient funds for your monthly payments to clear.
• combine your automobile insurance and your property insurance (home, condo or tenants) whenever possible.
• take preventative measures to reduce the likelihood or frequency of a claim, including regular vehicle maintenance, driving with winter tires, parking in a garage or covered space whenever possible, putting an alarm on your vehicle, taking driver’s training (new drivers), being cautious of lending your vehicle to others, etc.

 

There is a great article in the Edmonton Sun that further explains the current automobile insurance industry crisis.  To read it, please click here.

 

We also wanted to share a few facts regarding automobile insurance that you may or may not be aware of:

 

• Your deductible is the amount that you pay in the event of a physical damage loss.
  • If the loss is not at-fault, the deductible may still apply and will be reimbursed once recovered from the third party.
  • If the claim is a hit & run or an impact with an animal, your deductible may still apply.

 

• When you lend your vehicle to a licenced friend or family member, any losses that they have while driving your vehicle may directly impact your policy

 

• When you insure an additional private passenger vehicle, it can normally be added to your existing automobile policy and a new application would not be required

 

• There are many endorsements that we recommend adding to your policy, including the following:
  • SEF 20 (Loss of Use) – provides coverage (up to a daily/per claim limit) for alternate transportation, including a rental vehicle, in the event of an insured loss.
  • SEF 27 (Legal Liability to Non-Owned Automobiles) – extends physical damage coverage to a rental vehicle (up to a certain limit and usually within Canada and the US only).
  • SEF 43 (Waiver of Depreciation) – waives depreciation in the event of a loss within a certain amount of time (usually 30 months) for newly purchased vehicles.
  • SEF 18 (Replacement Cost) – provides replacement cost coverage in the event of a total loss within a certain amount of time (usually 60 months).
  • SEF 13D (Limited Glass) – limits the glass coverage on a vehicle, resulting in a reduction of comprehensive insurance premiums.  This endorsement is beneficial when the cost to replace vehicle glass is similar to or less than the policy deductible.  The majority of automobile insurance policies that have comprehensive coverage also include the SEF 13D endorsement.

 

 

If you have any questions regarding the above information, or if you would like to review your automobile policy, please do not hesitate to contact us and one of our knowledgeable Brokers would be happy to assist you.

 

Thank you,

The Costen Insurance Team