The Future of Vehicle Insurance in North America

But over time, vehicle insurance has become a contentious topic, be it price hikes due to driving history, rate disparities, confusing coverage options, and regulatory changes that have turned the Vehicle Insurance landscape into a heated one. So join us, as we take a look at where we are, where we’re going, and what we can do for a brighter future.  

As of 2023, car insurance rates are unstoppable. Between 2013 and 2022, the cost of auto insurance grew by 45.4% based on the latest Forbes report. If you're wondering why, inflation, supply chain issues, and costly car accidents are all contributing to greater car insurance premiums in 2023.

Accidents and claims were lower during the peak of the pandemic because driving was considerably curtailed. However, now that drivers are back on the road, accidents are costing far more in auto insurance claims due to higher-priced parts, labour, and medical bills. Based on our findings, an average American pays $1,771 a year or about $148 a month on auto insurance.

Meanwhile, Canadian drivers pay an average of $1,300 to $1,800 in vehicle insurance premiums per year. However, depending on factors, the amount you pay can be much greater or cheaper. For example, car insurance rates are higher for teenages, and they begin to decrease as you become older, as you are no longer a novice driver.

Except for California, Hawaii, Massachusetts, Michigan, North Carolina, and Pennsylvania, gender can also be used as a consideration in vehicle insurance prices. Car insurance firms believe that teenage males are more prone to participate in risky driving behaviour, so they initially charge more than females. Males' rates tend to fall beyond the age of 25, and they eventually catch up to their female counterparts.

Beyond age and gender, another factor is speeding tickets! According to a Forbes Advisor analysis, the national average rise in vehicle insurance rates for drivers who receive a speeding ticket is now up to 24%, or approximately $380 more per year.

Nearly 215 million drivers carry car insurance in the U.S, and the industry as a whole is worth about $316 billion as of 2022, according to IBISWorld. And that’s just insurance cost, to say nothing of maintenance and the increasing cost of gas.

Speaking of gas, an increasing number of drivers are also switching to electric and hybrid vehicles – which also make vehicle insurance more expensive. Apparently, repairing and replacing electric equipment and batteries in EVs is frequently more expensive than in non-electric vehicles. Even repair shops charge more because of the specialized training required to fix EVs. When insurance companies in North America calculate their rates, they look at claims paid for identical cars, among other factors, and set their prices accordingly. For example, if your electric car model has a history of expensive and/or frequent claims, insurance rates will be higher for all owners of the model.

Year over year, the cost of insurance fluctuates a great deal, closely tied to Economics, repair costs, climate change, Inflation, and plenty of other factors. For example, in the US insurance prices were up about 15% in March compared to last year, according to the US Bureau of Labor Statistics.

But, in 2023, when vehicles are becoming smarter, more connected, and capable of self-operation, the landscape of vehicle insurance in North America is also experiencing a paradigm shift. The conventional one-size-fits-all approach to insurance has evolved into a dynamic system, such as technology and changing driving behaviors.

So, with all this doom and gloom, how can we change the future of car insurance for the better?

Usage-based insurance (UBI) is at the forefront of the future of vehicle insurance in North America. Compared to traditional insurance models, UBI fundamentally redefines the way insurance premiums are calculated by taking into account individual driving habits and behaviors. So, instead of relying on demographic factors such as age, gender, and location, UBI harnesses data-driven insights to determine risk more accurately.

Some specific provinces and states have begun introducing very basic versions of this, for example BC has implemented a 10-15% discount on insurance for drivers who drive Drive less than 10,000 kilometres per year. Though still in its early stages, a welcome step in the right direction.

Odometers, Telematics devices or smartphone apps equipped with GPS capabilities collect real-time data on various driving behaviors, including speed, acceleration, braking intensity, and mileage. Because of this, safe drivers who exhibit responsible behaviors such as maintaining speed limits, avoiding sudden braking, and adhering to traffic rules are rewarded with lower premiums.

Let’s dig into telematics. Automobile insurance companies are now adopting telematics to offer personalized premiums based on their customers' driving habits. Telematics provides beneficial insights into two important areas of driving: driving behaviours such as speed, braking, and accident proneness, and vehicle maintenance utilizing engine data.

Through this, insurance providers are now able to collect information in order to grade one’s driving safety, or track your vehicle mileage - with the help of the Internet of Things. The Internet of Things (IoT) is a network of interconnected physical items that contain sensors, analyzing information through networks and cloud-based software platforms. To evaluate your risk level, this system collects data on how you drive, when you drive, and where you drive.

Insurers use these insights to encourage responsible drivers by cutting rates and providing additional advantages, allowing you to save more money. Moreover, telematics enables insurance companies to examine a driver's risk profile and tailor both offline and online vehicle insurance plans to the customer's individual pricing model.

New car models such as the Genesis GV60 and Tesla 3 and Y have also developed biometric vehicle access. Fingerprint recognition and facial recognition are being integrated into vehicles to ensure only authorized individuals can access and drive the car. This not only deters theft but also reduces the risk of unauthorized drivers causing accidents.

Apart from theft, the focus of insurance is on limiting risks and preventing accidents. Advanced Driver Assistance Systems (ADAS) are becoming more common in modern vehicles. One of our favourite features are Adaptive cruise control, which automatically adjusts vehicle speed to maintain a safe following distance, and lane departure warning systems, which alert drivers if they accidentally drift out of their lane. The good news is that even if you don’t have an EV or an overly expensive car, you can still protect your vehicle and experience driving safety features. Thanks to our trusty friend, dash cameras.

Dash cameras, or dash cams, have been a valuable tool for both car security and insurance claims. In the event of an accident, dash cam footage can provide invaluable evidence for insurance claims, simplifying the claims process and preventing disputes.

However, the benefits of dash cams extend beyond insurance claims. These devices also serve as a deterrent against insurance theft and fraud, which costs the industry billions annually. With dash cam footage, drivers can prove their innocence in cases of staged accidents or false claims, ultimately leading to fairer insurance rates for all parties.

As of this writing, there are no discounts on insurance if your car is mounted with a dash cam. It will not directly save you money on insurance, but, if you need to file a claim and prove your innocence, video proof of accidents and other hazards may help you save money. At-fault accidents raise insurance prices, and video evidence to the contrary is a useful tool in keeping your driving record clean and your insurance premiums low.

The Dash Cam industry continues to improve further, from vehicles like Teslas featuring built-in cameras, Cloud services letting you check in on your vehicle remotely, and all-new Sony Starvis 2 image quality ensuring crystal clear recording, cameras are more advanced, and more accessible than ever.

Drivers may think that vehicle insurance is a “just-in-case” purchase for your car. While it is important, drivers should also consider embracing technology and new ways of protecting their vehicles, such as installing a dash cam. While it doesn’t directly lower your insurance cost, having a dash cam provides you with a silent witness that, just like insurance, protects you from spending thousands of dollars and hassle in the future, ensuring you aren’t left cleaning up the mess of a hit-and-run all alone or the victim of a fraudulent claim, both of which could potentially increase rates without evidence.