What is the Insurance “Hard Market”?
It always seems like insurance rates are going up. But did you know there’s something called a “hard market,” when you might find it more difficult to get affordable coverage?
After several tough claim years for insurance companies, some are saying the hard market in Canada has arrived. That could mean you have to shop around to find the best value on your next policy.
“Hard” Versus “Soft” Market
The insurance market is cyclical. During a “soft” market, there’s lots of competition between companies. Premiums are stable, if not falling. It’s fairly easy to get coverage for all kinds of risks. As someone looking to buy insurance, you may have a number of options from which to choose and underwriting rules are less stringent.
A “hard” market happens as things look rough for insurers. Payouts may have increased and profits have declined. As a result, insurance companies are less inclined to take on new business. As a result, the requirements to get insurance are stricter, and premiums more expensive. There may be attrition in the insurance market as fewer players offer coverage to consumers.
The cycle heads back to a “soft” market as those high premiums and selectivity lead to strong profits. The appeal of high profits leads to more competition in the industry.
Is Canada in a “Hard” Market?
Some experts say that at least some Canadian regions, like Ontario, have entered a hard insurance market. That’s the result of high payouts from insurers. The culprits are catastrophic weather claims, new automobile technology that makes cars harder to repair, and fraud.
But not everyone agrees. Speaking to a crowd of industry experts in January 2019, P&C industry consultant Phil Cook refuted the argument that a hard market has arrived. He said Canadian insurers still have sufficient capital and capacity. Although 2018 was a tough year, it was only by a small amount, and hard markets typically follow two to three years of losses.
Also, there are plenty of companies willing and able to sell insurance. According to Cook, Canada has not yet seen the stage where there are no new players in the insurance industry — another sign of a hard market. Cook did predict certain kinds of insurance will have premium price increases, which he called “corrections.” There have already been changes in niche areas like directors’ and officers’ liability insurance and aviation insurance.
What It Means for Consumers
So, if this isn’t the start of hard market, but there are “corrections,” what can consumers expect? Since “correction” is a kind of code word for higher prices in this context, your insurance may be more expensive than you expect. But at the same time, there are many insurers out there who may offer the coverage you are looking for.
At DPM Insurance Group, our brokers and CSRs work with a wide array of insurance providers to find you the best possible deal for the coverage you seek. If you have an impending renewal, or are looking for a new policy, click here to access our list of offices across Winsor-Essex and Chatham-Kent, and let DPM show you what we can do for you. https://dpmins.com/locations/