Understanding the recent insurance price increase trend: The hard market

In a hard market, your insurance broker can be your best friend

The Hard Market – Life can be complicated, and it’s certainly no picnic in times of crisis. Over the last several years Canadians have witnessed breaking news stories filled with destruction and devastation around the country whether it be fierce storms, intense flooding or raging wildfires. The impact of climate change on homeowners and business owners is one mired in both financial and emotional stress: from damage and destruction of property, to the challenges of recovery and rebuilding. To the home and business owner, their insurer is like a super hero, swooping in, righting the wrongs and helping to restore life and livelihood. Laurie Kay, Senior Account Executive, tells the Vancouver Sun, that it pays for a person to do their homework when it comes to insurance. In the long run, a broker can help you save money by doing the correct research at the start of buying or renewing insurance.

In times of inclement weather, insurance claims increase

The growth of insurance claims in Canada has reached monumental numbers across the board: home, auto, commercial and marine. Insurers are reporting that the dollar amount of payouts is surpassing the premiums received, creating a market that is more complex and obviously unbalanced, courtesy of a lot of bad weather and other extenuating factors. To maintain this industry’s business model, the insurers are increasing premiums. Instead of a superhero, the insurers are seen as more like a villain in what is dubbed a hard market.

What is a hard market?

Simply put, in a hard market trend, a consumer will expect to pay a higher insurance premium and face more underwriting restrictions, or possibly be turned away altogether depending on the property, business or event that requires coverage. What might have been insurable three years ago, maybe too risky today.

To understand why insurance rates are increasing now is to understand the complexities of life in 2019. Practically everything we own contains some form of technology. Our vehicles are computerized and our homes are loaded with tech. Commercial enterprises run on expensive technology, from office equipment and computers to hi-tech machinery and commercial vehicles. Couple that with climate change and extreme weather conditions striking a major metropolitan area, and the number of insurance claims skyrocket. Repairing or replacing damaged technology is almost always going to be costly in both time and money.

Canada hit hard with storms

The December 2018 wind storm that pummeled the south coast of British Columbia was the most damaging storm in the history of BC Hydro. Over 3000 homes damaged and 750,000 customers without power. The insured cost exceeded $37 million. In fact, 2018 was a costly year for the entire country, with insured costs reaching $1.9 billion dollars due to extreme weather incidents. Still nowhere near 2016’s Fort McMurray fire with an insured cost over $3 billion.  All that money has to come from somewhere.

Distracted driving contributes to insurance increases

Storms, forest fires and floods are large scale events often caused by an act of nature. However, there are other costly contributors that increase insurance rates and claims, and they are small enough to fit in the palm of your hand. Driving while distracted by a cell phone, or a GPS or even a cheeseburger continue to cause accidents and fatalities. According to data from Transport Canada’s National Collision Database, distracted driving contributed to an estimated 21% of fatal collisions and 27% of serious injury collisions in 2016.

This isn’t the first hard market, and most likely won’t be the last. But, the good news for policyholders and those shopping for coverage is, they’ll always have access to experienced and educated insurance brokers at Reliance Insurance to answer questions and offer guidance. There are many factors that can lower insurance costs including reporting any preventative upgrades to the home/business like water leak protection systems and burglar alarms. Bundling products, increasing deductible and even a credit check can also help decrease costs. A qualified insurance broker knows how homeowners or business owners can save on their coverage during a hard market, so it’s worth it to meet with them before renewal.

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