If it feels like your car insurance premium goes up every single year, you’re not imagining it. Since the pandemic, auto insurance in Canada has become steadily more expensive, and despite some recent improvements in theft rates and supply chains, there’s little relief in sight. In fact, most experts believe premiums will keep climbing well into 2026.
This isn’t just another case of “everything costs more now.” Auto insurance has its own perfect storm of problems and Canadian drivers are stuck paying the price.
Inflation has touched almost every corner of our lives, from groceries to rent, and insurance is no exception. According to Statistics Canada, overall prices rose about 2.2 per cent year-over-year this October. But auto insurance didn’t just keep pace it surged ahead.
Car insurance premiums jumped an average of 7.3 per cent compared with last year, more than three times the national inflation rate. Since 2020, premiums for passenger vehicles have risen nearly 19 per cent. That’s a painful increase, especially for households already stretched thin.
As insurance expert Daniel Ivans of Rates.ca explains, rising costs ripple through the entire system. Repairs are more expensive, labour costs are higher, and insurers eventually pass those costs on to drivers.
One of the biggest drivers behind soaring premiums has been auto theft. While theft rates have finally begun to decline down about 19 per cent in the first half of 2025 compared with last year the damage has already been done.
Auto theft claims cost Canadians roughly $1 billion per year today. Just a few years ago, in 2019, that figure was under $500 million. At the peak in 2023, claims exceeded $1.5 billion. Even though thefts are easing, they’re still close enough to record highs that insurers haven’t felt comfortable lowering premiums.
Ontario, in particular, continues to feel the impact, which helps explain why drivers there pay some of the highest insurance rates in the country.
The pandemic may feel like old news, but its effects are still baked into today’s insurance prices. Supply chain disruptions made car parts scarce, repairs slower and vehicles more expensive to replace. Labour shortages added another layer of cost.
Now, new challenges like tariffs and shifting supply chains are keeping pressure on the system. According to Ivans, these issues have compounded over time, making it difficult for insurance costs to come back down, even as some conditions improve.
Another uncomfortable reality is climate change. Floods, wildfires, severe storms and extreme cold are becoming more frequent and more expensive.
In 2024 alone, insurers paid out more than $8 billion in climate-related claims. Those losses don’t disappear. They’re spread across policyholders in the form of higher premiums, affecting not just home insurance but auto insurance as well.
And there’s no sign that extreme weather is slowing down.
The outlook for next year isn’t encouraging, but it’s not entirely bleak either. Experts expect premiums to keep rising, but at a slower pace possibly in the range of four to six per cent assuming no new shocks hit the system.
That said, electric vehicle owners may feel the squeeze more than others. EVs are often more complex and costly to repair, with specialized parts and longer wait times, which can translate into higher insurance costs.
For most Canadians, there’s no magic fix. Insurance is mandatory, and rising costs are largely out of individual drivers’ control.
Still, there are ways to soften the blow. In provinces with private insurance markets, shopping around can make a real difference. Bundling home and auto insurance, insuring multiple vehicles with the same provider, and reviewing coverage regularly can all help keep costs in check.
In provinces with government-run systems, options are more limited, but choosing higher deductibles or optional coverages carefully can still lead to savings.
Car insurance in Canada has become a slow-burning financial stress not dramatic enough to dominate headlines every day, but costly enough to hurt. While theft rates are improving and supply chains are stabilizing, inflation, climate change and rising repair costs continue to push premiums higher.
For now, Canadian drivers should plan for insurance bills that keep creeping up and hope that the worst of the increases are finally behind us.
