If you’ve renewed your car or home insurance lately, you may have noticed the premium has jumped. That’s not just perception — 2025 is seeing continued upward pressure on insurance costs across Ontario. While many factors play a role, the following are the key drivers behind rising premiums, how they’re interacting, and what consumers can do to push back a little.

1. Claims Costs Are Rising — Everywhere in the Chain

One of the most direct reasons premiums go up is that insurers are paying more on claims. These increased costs come from:

Repair inflation & supply chain disruptions

The prices of car parts, building materials, labour, and specialized components have all climbed sharply in recent years. Complex, modern vehicles with advanced driver assistance systems (ADAS), sensors, and electronics cost more to repair after an accident.
For homes, the same dynamic applies: materials, skilled labour, and replacement costs have all ballooned, pushing claims costs higher.

More total losses

Because of rising repair costs and delays (from supply and labour shortages), more vehicles end up being “totaled” rather than repaired. That means insurers must pay out full replacement values more often, which is a heavier cost burden.

Higher frequency of claims

As people resume more normal driving post-COVID, traffic and accident rates have rebounded, leading to more claims overall.

More extreme weather / natural disasters

For home (and to some extent auto) insurance, climate change is raising the frequency and severity of weather-related damage: flooding, windstorms, hail, sewer backups, and more. These events lead to large-scale, expensive claims.
In fact in 2024, insured losses from severe weather in Canada hit record highs, and that has put upward pressure on premium pricing.

Auto theft and comprehensive claims

Ontario has seen a spike in auto thefts and vandalism, which increases the number and cost of comprehensive (non-collision) claims.
In some years, insurers in Ontario have paid out $1.90 in comprehensive claims for every dollar collected in premiums for that line of business — an unsustainable ratio.

Legal, medical, and liability costs rising

Injury claims, medical treatment costs, legal fees, and court awards have all increased. When a claim involves bodily injury or liability, those escalating costs add significantly to insurers’ payout burden.

Because insurers must remain financially viable, when the cost of claims rises, they shift much of that risk to policyholders via higher premiums.

2. Inflation — Not Just Gas and Groceries

General inflation also plays a big role. Many of the inputs for insurance (labour, parts, materials, vehicles, legal services, medical costs) are rising in cost. Even if the “headline inflation” rate is moderating, the inflation in sectors relevant to insurance is more severe.

So even without an increase in claims frequency, the cost per claim tends to rise.

3. Risk Reassessment and More Granular Pricing

Insurance isn’t priced purely on broad averages anymore. Insurers are increasingly relying on more detailed, localized, and real-time data to assess risk. This means:

• Location-based risk: If your area has shown higher rates of accidents, theft, flooding, or weather damage, insurers will adjust premiums upward for that locale. As an example, some cities in Ontario saw double-digit percentage jumps in average auto insurance in 2025, partly because of local accident and theft trends.
• Higher-risk vehicle models: Cars with more high-tech features, electric powertrains, or expensive parts are more costly to repair and thus attract higher premiums.
• Behavioral & usage data: Insurers are increasingly using telematics (data from driving behavior), mileage, past claims history, and other personal risk indicators to refine premiums. If the data suggests higher risk, your premium may go up even if you personally haven’t had claims.
• Cycle of underwriting: The insurance industry tends to go through cycles (hard vs. soft markets). After a period of poor profitability (e.g., because of unexpectedly high claims or disaster years), insurers may tighten underwriting and increase premiums to rebuild reserves.

Together, these factors mean that some individuals and areas are seeing steeper increases than others — even neighboring communities sometimes see very different rate changes.

4. Regulatory & Market Constraints

• Limited ability to cross-subsidize: In some jurisdictions, regulation limits how much insurers can subsidize riskier customers with less risky ones. This constrains flexibility, pushing them to raise premiums across the board. In Ontario, auto insurance rates are reviewed by the provincial regulator (FSRA), and insurers must justify rate changes. The regulator monitors fairness and solvency, which can limit how far insurers can maneuver.
• Lack of transparency in home insurance: Unlike auto insurance, home insurance in Ontario is less regulated in terms of rate-setting transparency. That lack of public oversight makes it harder for consumers to challenge or understand increases.
• Capital and investment returns: Insurance companies also rely on investment income from collected premiums to help cover claims costs. In environments where interest rates or investment returns are lower (or more volatile), insurers may need to rely more on premiums to maintain profitability.

Compound & Interacting Effects

One important point: these drivers don’t act in isolation. For example:

• Inflation drives up repair and material costs, which amplifies the impact of each claim.
• More frequent extreme weather events boost both the number and severity of claims.
• In areas with high theft, the increased frequency of comprehensive claims adds stress to an insurer’s reserve.
• Rising legal or medical costs interact with higher liability risks to produce more expensive injury claims

These compounding pressures mean that even a modest uptick in one factor can cascade into outsized premium increases.

Ontario-Specific Examples & Trends for 2025

To ground this in real Ontario data:

• On average, Ontario auto insurance premiums rose about 4.1% in 2025 year-over-year, according to MyChoice. MyChoice
• But that average hides wide variation: some cities (e.g., Kingston, Barrie, Windsor) saw double-digit percentage increases. MyChoice
• For home insurance, Ontario saw 5.7% average increase in personal property premium rate change in Q1 2025. Rates.ca+1
• Over the decade from 2014 to 2024, home insurance in Ontario increased ~84% cumulatively, well above inflation. The Pointer+2Insurance Business Asia+2
• 2024 was a record year for insured losses from natural disasters in Canada (~$8-9 billion), which is putting pressure on insurers to recoup costs. Economical+3Insurance Business Asia+3Insurance Institute+3

What This Means for Consumers & What You Can Do

While many of the forces pushing premiums higher are beyond individual control, there are steps consumers can take to mitigate the impact:

*This is in no way to act as Professional Insurance Advice, we always recommend you speak to your Registered Insurance Broker for Individualized Insurance Advice*

• Shop around (Or ask your Favourite McGoey Broker to) / compare insurance companies — don’t assume your current insurer is giving the best rate.
• Raise your deductible (if you can afford a higher out-of-pocket amount) — that lowers the insurer’s exposure.
• Choose safer, less expensive-to-repair vehicles — fewer claims and lower repair costs help.
• Bundle policies (auto + home) with the same insurer — often leads to discounts.
• Drive safely / maintain clean record — fewer claims or traffic violations helps your rating.
• Mitigate risk around your home — e.g. flood proofing, proper drainage, maintenance to reduce the chance of claims.
• Use telematics or usage-based insurance, if offered — if your actual driving is low-risk, you may benefit.
• Stay informed about regulatory changes and keep pressure on regulators or insurers to increase transparency in how rate changes are justified.

We know, it’s a lot, and it’s stressful. We are feeling the impact on our own policies as well. We really are in this together.

If you have any questions at all, feel free to give your broker a call.