Ontario’s Insurance Industry is in a Hard Market
What is going on?
When it comes to insurance, a hard market is when the capital used to fund insurance transactions begins to dry up or not be as readily available as it usually is. The reduction of capital availability can occur at different levels of the insurance supply chain and when significant insurance-related or economical events occur around the world, it can have a lasting impact here in Canada.
Why is this happening?
In short, insurance companies currently aren’t making as much money as they need to. Profits ensure that their product availability, supply and price can be held stable. There are two main reasons for this, although each company’s situations may vary.
Auto insurance is causing concern across Canada, but the most concern is in Ontario and Alberta. Companies that operate within these provinces are finding it difficult to reach a certain profitability level where they can stabilize their auto insurance product offerings. One factor in Ontario’s auto market is that the cost of repairing vehicles has increased significantly with the amount of technology being installed in them, but this cost has exceeded the anticipated inflation cost built in to pricing (i.e. the future estimated costs of settling property damage claims is greater than the premiums collected to settle those claims).
Will pricing ever be corrected?
Property and casualty (P&C) insurance companies in Canada are regulated by federal and/or provincial regulators, called Superintendents of Insurance. So will pricing ever be corrected? In some respect, yes. But when it comes to auto insurance there are many factors to consider, especially the regulator’s influence on the rate setting process. Many of these factors will be addressed over time, but only when trends become predictable enough for product pricing to get ahead of claims and become responsive.
How long will this hard market last?
Best case scenario is that we’re likely to experience the hardening of the insurance market for the remainder of 2019. There is indication that some companies are expecting to take 3 years to get on top of the physical damage inflation/pricing issues.
What happens next?
Prices are continuing to rise and risks are becoming harder and more challenging to place. The government and regulators are very aware of the public's frustration with rising insurance costs, but we, your brokers, are here to help and make sure you're getting as fair and accurate rate as possible. We’re keeping a close eye on this and we’ll continue to support our customers and clients as the market evolves.
At Petley-Hare, we want to be honest with you about these topics, and hopefully help clear some things up! If you have any questions, contact us at any time, or let us shop around for you, request a free no-obligation quote from our experts, we’ll get through this together!!