Inflation in Canada – what it means for your auto insurance
Inflation has come down from a multi-decade high, but costs remain elevated. What does this mean for your car insurance premium? Compare auto insurance quotes with us to find your lowest rate.
This article was originally published on November 16, 2023, and was updated on April 16, 2025.
From grocery bills to gas prices, the impact of inflation has been hitting Canadians across the country hard. In March 2025, the government reported a consumer price increase of 2.3% in comparison to last year. So, what does this mean for your auto insurance rate?
How inflation rates are calculated in Canada
To understand the impact of inflation on your car insurance premium, you’ll first need to understand how inflation is really measured. In Canada, the government uses the Consumer Price Index (CPI) to track the pricing changes of a fixed basket of goods and services over time. This basket includes different categories, such as food, shelter, clothing, and transportation, to give an overall indication of the country’s inflation rate.
Under the transportation category, the CPI tracks the pricing changes for several goods and services, including vehicles, public transit, gas, parking fees, and auto insurance. Every month, Statistics Canada releases the data for the previous month – this article uses the data from the March 2025 Transportation Consumer Price Index, updated in April of this year.
Have auto insurance rates increased due to inflation?
According to the Consumer Price Index, insurance premiums for passenger vehicles increased by 7% in March year-over-year. But this number is representative of Canada as a whole – let’s take a closer look at the data for the private insurance provinces in the table below.
|
Province |
Price change |
|
10.4% |
|
|
10.3% |
|
|
-2.1% |
|
|
5.6% |
|
|
12% |
|
|
11.7% |
|
|
6.4% |
Nova Scotia and Prince Edward Island saw the greatest inflation of car premiums for private insurance provinces when comparing March 2025 to March 2024. Other provinces still saw significant increases YoY, with Ontario and Alberta over 10%. Quebec was the only province to see deflation.
Public insurance provinces like British Columbia and Saskatchewan also saw increases in insurance premiums—B.C. 6.7% and Saskatchewan 0.7%. In these provinces, private car insurance providers don’t compete for customers; instead, auto coverage is offered by one sole provider (SGI or ICBC).
Although auto insurance rates in Canada increased in price by 7% year over year as of March, you likely faced a different outcome depending on where you live.
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Will inflation impact car insurance in the future?
Yes, it’s only a matter of time before insurance rates in Canada increase as a result of inflation. Aside from your individualized factors, such as your age and driving history, car insurers also look at overall costs within the auto industry to calculate a policy’s premium. A rise in the cost of vehicle parts and vehicles themselves leads to a more expensive bill when a claim is made – and insurers need to make this money back somewhere.
According to the Consumer Price Index, the price to purchase or lease a vehicle, vehicle parts, maintenance, and repairs, and maintenance and repair services have all been inflated within the past year. The table below outlines the percentage increase of these expenses from March 2024 to March 2025 within Canada.
|
Auto industry expense |
Price change |
|
Purchasing/leasing a passenger vehicle |
1.9% |
|
Vehicle parts, maintenance, and repairs |
2.7% |
|
Vehicle maintenance and repair services |
3.6% |
The increase in auto-related expenses will cause insurance premiums to inflate. If your new car is totalled in an accident, your insurer will now need to spend more to cover the replacement cost of the vehicle. If your windshield repair is taking longer than expected due to supply chain issues, the bill will be higher for your provider.
On top of these inflated auto expenses, the 25% U.S. auto tariffs on vehicles and parts are expected to increase prices even further. Manufacturers and repair shops will now have to pay more for essential auto parts and these costs will ultimately be passed down to consumers.
As car insurance companies continue to face more and more expensive claims from customers due to these external factors, you can expect to see higher policy premiums in the future.
Also read: The total cost of car ownership in Canada
When will you see car insurance rates increase?
The good news is that insurers aren’t able to increase your rates to adjust for inflation or tariffs mid-policy. When you purchase your car insurance, the premium is set for the entire term which in most cases, is one whole year.
However, this does mean you could potentially face a rate increase due to inflation when your car policy is up for renewal. To protect yourself from inflation, it’s important to shop around and compare car insurance quotes from multiple providers instead of automatically renewing your coverage with your current insurer. While your current provider might have been hit with numerous expensive claims throughout the year, causing a rate increase for all its policyholders, there could be other viable insurers that haven’t been hit nearly as hard and looking for your business.
The bottom line
As car insurance prices continue to increase across Canada, you can take steps to keep your premiums low. It starts by comparing all of your options and saving on car insurance with us—by taking five minutes out of your day, you could save hundreds of dollars throughout the year.