How clients’ economic stress impacts auto coverage

Auto loans and other car-related expenses are among the economic stressors causing more Canadians to fall behind on their bills, says a new report from Equifax Canada.

The auto loan delinquency rate for younger drivers reached 1.95% in the first quarter of 2025 (up 30% from the first quarter of 2024), against an overall rate of 1.08% (up 15.3%) for all consumers in the same period.

On average, debt per consumer outside of mortgages reached $21,859 in 2025’s first quarter, Equifax says. The increase was driven primarily by surging auto loans as Canadian buyers completed purchases before tariff impacts sparked price increases for new and used cars, the credit bureau says.

“We’re observing positive shifts in consumer behaviour, with reduced credit card usage and early signs of delinquency stabilization for some consumers. However, headwinds will likely persist, such as rising unemployment and rising food prices, in already strained regions,” says Rebecca Oakes, vice president of advanced analytics at Equifax Canada.

Insurance implications

Rising financial pressures can create additional auto-related problems for consumers.

Some brokers have observed consumers reporting mechanical issues when claiming for minor accidents. In some cases, those claims don’t appear to result from the collisions and are challenged following insurance company investigations. Those claims inflations, CU sources suggest, could stem from high levels of economic stress experienced by some clients.

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And growing financial pressures can also put auto insurance at risk because consumers’ financial errors can lead to policy cancellations and related financial consequences, says LowestRates.ca.

“When money is tight, insurance often gets deprioritized — but losing coverage can make it much more expensive to get reinsured later,” says Steven Harris, a licensed insurance broker and LowestRates.ca expert. “We’re seeing more cases where drivers lose coverage not because of serious driving issues, but because they missed a payment or forgot to update their policy details.

“Many Canadians don’t realize how easy it is to have a policy cancelled — or how difficult and costly it can be to replace.” 

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There are several scenarios that can lead to auto policy cancellations, including:

• Missed payments — even one can result in cancellation for non-payment 
• Frequent claims — filing multiple claims over a short period, particularly if they’re at-fault, can make insurers rethink a customer’s risk profile 
• Undisclosed modifications — changes to vehicles must be reported to insurers if customers want to remain covered, including both performance and non-performance upgrades
• Outdated or inaccurate information — brokers should remind clients to update insurers about address changes, additional drivers in the household, drivers from outside the household who will use the vehicle, and changes in how the vehicle is used, such as for rideshare. Failing to provide these updates can void coverage
• License suspension or expiration — either scenario can lead to immediate policy termination 
• Misrepresentation — Giving a broker or insurer inaccurate information during the application process, even unintentionally, can lead to cancellation. 

Tight economic times have prompted many insurance customers to take on rideshare and food delivery gig work to help make ends meet, industry sources have told CU. And, in many cases, these clients may not always consult insurers or brokers before starting those jobs.

“Something as simple as using your personal car for part-time ridesharing or failing to update your contact info can trigger a cancellation,” says Harris. “And once that happens, it can stay on your record — raising your premiums and limiting your insurer options for years.” 

Phil Porado

Phil, an award-winning journalist with over 30 years of experience in financial topics, has been managing editor of Canadian Underwriter for more than three years.