Over the last year, Canadians have been inundated with stories of auto insurance price freezes and reforms. But despite all the talk from the politicians and industry experts, you've received your renewal and it includes another premium increase. How is that possible?


Reductions take time to reach consumers

Unfortunately, most drivers will not see a significant decrease in their car insurance rates when they first hear of them. In fact, many drivers will see increases on their renewals despite what they've heard on the radio, seen on the television or read in the newspaper.

The reason for this is the renewal notice you received just yesterday, was actually approved by the provincial regulators sometime in the last 11 months - before the effective date of the recent spate of planned insurance decreases or rate freezes.

For example, lets say you're an Ontario resident whose insurance renewed in August 2003. If, the month after you renewed (September), your insurance company then received approval to raise rates by 12%, this increase in premiums would not be reflected in the premiums you are currently paying.

Consider as well, that your insurance company then reduced rates by 10% in March 2004. When you get your renewal this August, your rates will not go down as you might believe, but instead increase. Your premium is determined by each of the approved rating changes over the year, not just the most current. As such, your premiums will still be playing "catch up" and will include the 12% increase from the year before followed by the 10% decrease this year.

The same holds true for insurance rate freezes. If your province froze auto insurance rates, it will have been as of a specific date. For example, in Alberta, rate freezes were effective October 30, 2003. That means if your insurance renews in August of each year, the renewal you receive this August will reflect the approved rating program in place just before the rate freeze last October. This could mean that you may see an increase on your next renewal notice if the rating program changed between August, when you renewed, and October's rate freeze.

Don't wait for the savings to come to you - you could be saving more!

Each insurance company calculates its rates differently. That's why even in these times of auto insurance reforms and rate freezes, shopping around for a better insurance rate when you get your car insurance renewal could still save you money. Compare quotes online at Kanetix, to see if better rates are available.

Originally published in July 2004.The information contained within this article is subject to change. Always speak with your current insurance supplier, or a licensed insurance representative, to answer your specific questions. The information collected and compiled here is intended to simply act as a guide.
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