Why are insurance rates increasing?
Inflation trends, robotics and automation, capacity changes.1 These are just some reasons for commercial insurance rate increases cited by industry leaders in a recent Insurance Business Canada article. In fact:
“The Canadian commercial lines insurance market is hardening. Carriers are pushing for more rate, they’re tightening their policy terms and conditions, they’re increasing deductibles, and they’re assessing how much participation and capacity they’re willing to retain on accounts. It’s a very different market to 10-years-ago.”2
Insurance Business Canada Magazine “Hard market in commercial lines: why and what’s next?”
When it comes to insurance premiums increasing, your business location doesn’t matter. When rates for commercial property insurance and commercial general liability insurance people start asking us why.
The answer isn’t simple or straight-forward because the price of property and casualty insurance products is subject to a multitude of factors.
2020 price increases – what to expect
Across Canada, industry experts note that change – and more often than not, rate increases – are expected in the new decade. Specifically,
“Commercial property, umbrella, and public company directors and officers (D&O) lines are expected to see the most widespread rate hikes of 20% and higher, in addition to capacity withdrawals” 3
“About 20 lines of commercial business are expected to see rate increases – many of which will be sizeable, and for more lines than in recent years – reflecting current hard market conditions. Six lines (fiduciary, environmental, political risk, kidnap and ransom, and terrorism) will have a mix of both increases and flat renewal rates, while two lines (international casualty and surety) expect price decreases.” 4
Canadian Underwriter: Commercial lines that will see the greatest rate increases in 2020
Knowing that change is coming is one thing. Working with business insurance experts who exclusively specialize in commercial insurance is another. This is just one reason why so many Canadian businesses choose to work with ALIGNED insurance brokers.
What can cause insurance rates to increase?
When insurance premiums go up, there are always behind-the-scenes reasons. Some of these may include:
- Inflation
- Government legislation and regulation
- Actuarial analysis and predictive modelling
- High claims / losses due to extreme weather events and natural disasters such as hurricanes, forest fires, heavy rainfall, etc.
- Significant losses incurred by insurance companies worldwide as well as by some of Canada’s largest insurers including Lloyd’s of London
- Trends around personal injury and accident litigation
- High vehicle repair costs due to embedded technology that is expensive to repair or replace if damaged
- Operating cost increases for insurance industry organizations
Insurance rates (premiums) are set based on pools, industries, classes of business, geographies, etc. Rates are refined based on the specifics of the operations. While most factors are largely outside of your control, working with an ALIGNED broker can help you better manage trends and changing insurance costs.
Related Matters: Why are insurance premiums increasing in Canada? – ALIGNED Insurance
How ALIGNED can help when insurance rates are increasing
If you are concerned about 2020 insurance rate increases, we can help with
- Insurance program optimization and restructuring to decrease total cost of risk (TCOR)
- Increasing your deductible levels for greater premium savings
- Proactive re-marketing of your renewal with some of the 65+ top Canadian insurers we work with
- Ensuring brokerage service levels and compensation are appropriately aligned with services and support
Sources: 1,2 Insurance Business Canada Magazine “Hard market in commercial lines: why and what’s next?”; 3,4Canadian Underwriter: Commercial lines that will see the greatest rate increases in 2020
