The legalization of cannabis on October 17 was a huge day for Canada, but for drivers it has created a lot of questions. Like alcohol, cannabis is considered a substance that impairs your ability to drive, but what constitutes ‘impairment’ is somewhat unclear right now, and impairment rules differ between police forces across Canada.

One thing’s for sure, according to Lowestrates.ca founder and CEO Justin Thouin, which is that “auto insurance rates can only go up with the legalization of cannabis.” If legalization leads to more impaired driving and accidents, all drivers will see their rates go up regardless of whether or not they’re cannabis users, he explained. Thouin referred to an Insurance Institute for Highway Safety report to back up his assertion. The report entitled ‘Effect of recreational marijuana sales on police reported crashes in Colorado, Oregon, and Washington,’ was released in October 2018 and suggests that: “the legalization of retail [cannabis] sales was associated with a 6.0% increase in insurance collision claims compared with control states.”

In the state of Colorado, which became the first US state to allow retail sales of recreational marijuana in January 2014, auto insurance rates jumped by 54.2% between 2011 and 2017. While this dramatic average-premium increase was driven by a number of factors (traffic volume, distracted driving, vehicle repair costs, un-insurance), the legalization of recreational cannabis certainly played a part.

“In the US states where cannabis has been legalized, accident rates are 5.2% higher than in neighbouring states where it’s still illegal,” Thouin commented. “If there are more accidents on the road and there are more collision claims, insurance companies are going to have to pay out more and will therefore have no choice but to increase prices.

“It’s a difficult market in Canada right now. Insurance companies are getting a bad wrap because car insurance premiums are increasing in multiple provinces, but what consumers don’t understand is that they’re not just increasing rates to make more money. Lots of insurance companies are not doing well from a profitability standpoint when it comes to car insurance – and that’s because of issues like insurance fraud, distracted driving and the increased cost of automobile repairs increasing the frequency and severity of claims. Add cannabis to the mix and more impaired driving, and insurers are going to have no choice but to increase their prices in order to actually run a proper business.”

Consumers hate seeing their rates go up, and the first person to feel that wrath is the insurance broker. In a rising rate environment, the broker becomes “more important than ever” as a conduit of information and explanation, according to Thouin. To mark legalization, LowestRates.ca surveyed 1,527 Canadian drivers and found 91% didn’t know how legalization would impact their car insurance rates. That lack of knowledge spread across the board, whether it was drivers in Ontario or those in Atlantic Canada.

“Brokers need to explain to their consumers why rates are increasing, what’s behind it, and what they can do about it,” Thouin told Insurance Business. “It’s also important for brokers and consumers to continuously shop the market to make sure the insurance company they’re with is offering them the best solution and the best price for their unique needs.”