Auto insurance rate regulators and public insurance providers in several provinces have discussed the possibility of increasing insurance rates as the industry braces for possible U.S. tariffs, which would likely make vehicles and car parts more expensive.
U.S. President Donald Trump has pledged to impose across-the-board tariffs of 25 per cent on Canadian and Mexican imports as of Tuesday and similar duties on steel and aluminum from Canada and other countries starting March 12. If implemented, those levies – along with Canada’s threatened countertariffs – are expected to drive up the price of new cars and auto parts made in North America, which could raise overall claim costs for auto insurers.
Most provinces told The Globe and Mail they are studying the possible impact of the tariffs on insurance rates, though none said rate increases related to the duties are planned or imminent.
With many auto parts crossing the Canada-U.S. border several times as they move along tightly integrated supply chains, broadly applied 25-per-cent tariffs would add layers of taxes to the prices of both new vehicles and car components.
The duties on steel and aluminum would drive prices higher still. Steel, for example, makes up about 65 per cent of the weight of the average car, according to 2021 U.S. data.
Aluminum can be found in anything from engines and transmissions to doors and hoods. It’s a significant component of high-end cars such as Mercedes and Teslas, which have production facilities in North America.
U.S. tariffs on Canada and Mexico coming Tuesday, but may not be 25 per cent, Lutnick says
Higher prices would make it more expensive to fix or replace vehicles after accidents, driving up claim costs and stoking concerns that consumers could see higher premiums.
Among the provinces with public insurance, the Insurance Corporation of British Columbia and Saskatchewan Government Insurance are looking into the potential impact of tariffs but said it’s too soon to tell what that will be.
Manitoba’s public insurer said it considers any economic factors that could affect claim costs when requesting new rates. The next decision would affect rates for the 2026-2027 fiscal year, it said.
Among provinces where private auto insurers need a regulator’s blessing for rate changes, Ontario, Nova Scotia and New Brunswick said they have received some preliminary inquiries from private insurers about the possibility of bumping up rates because of the tariff threat.
The Canadian Automobile Insurance Rate Regulators, an umbrella group, also said it is considering a study on the impact of tariffs.
Alberta Finance Ministry spokesperson Justin Brattinga said the government is monitoring the situation but at the moment isn’t considering raising the 7.5-per-cent cap on annual auto insurance rate increases, which applies to drivers without recent at-fault accidents or traffic convictions.
In Quebec, which provides public insurance for bodily injury but lets private insurers set rates for property damage coverage, the province’s financial watchdog, the Autorité des marchés financiers, said it has held talks about the tariffs with insurance companies.
Although insurance providers would likely feel the impact of the duties shortly after they came into effect, it could take months for any price increases to hit policyholders, said Rob de Pruis, the national director of consumer and industry relations at the Insurance Bureau of Canada.
How high premiums could jump is hard to gauge. In the U.S., rate-comparison platform Insurify estimated that annual coverage costs for Americans could climb 8 per cent by the end of 2025, rising from US$2,300 to $2,500 on average, because of tariffs on Canadian and Mexican imports. If tariffs weren’t on the table, coverage would increase by only 5 per cent year-over-year, it estimated.
Matt Hands, the vice-president of insurance at Ratehub, a Canadian financial products comparison site, said tariffs might also accelerate the pace of increases, adding another financial hit to an industry already reeling from the soaring inflation in the auto sector during the pandemic and a spike in auto thefts.
On the other hand, vehicle damage is only part of the outlay insurers face for claims, which also include labour and covering losses such as injury or death.
In a recent earnings call, Charles Brindamour, the chief executive officer of Intact Financial Corp., Canada’s largest property and casualty insurer, said the company’s ability to “manage the supply chain” would help soften any impact from tariffs.
Intact spokesperson Caroline Audet said the insurer, which has a network of in-house service centres across Canada, is sourcing more car parts domestically. The company also said auto parts and replacement costs make up 40 per cent of its total auto claim costs. Since only about a third of the cost of those parts and vehicles comes from the U.S., just 12 to 13 per cent of its total auto costs would be exposed to the tariffs, Ms. Audet said via e-mail.
But, speaking to analysts about the possible effects of the tariffs on its auto insurance business, Mr. Brindamour also touted the company’s ability to reset prices annually.
“Our product is just 12-month duration, so we can reprice when we want,” he said.
