What Are Insurance Costs Looking Like in 2023?

If you’ve noticed your auto insurance rates have gone up, or your home insurance, or any other personal lines policies, then you’re not alone. Canadians have seen a pretty considerable impact to their insurance premiums. We’ve briefly addressed why your insurance rates are increasing in previous blogs, but we’ve yet to take a look at the current status of the insurance industry and how those trends are going to change or even stay strong throughout 2023.

With record-high Canadian weather losses, rising interest rates, and record-high interest rates, insurance rates for personal lines have been steadily increasing. What does this mean for Canadians? Why is this happening? In this article, we address all that and more.

What is an insurance hard market?

Canada’s insurance industry seems to be in the middle of a phenomenon known as a “hard market.” The insurance industry has always been known for its strange lingo and the term “hard market” may be perplexing to some. Ultimately, what a hard market is defined as is circumstances where the insurance industry is charging higher premiums, offering reduced coverage terms, and the capacity for most forms of insurance being offered are severely diminished.

This isn’t a conscious effort to make things difficult for policyholders just because insurance companies are “mean.” An insurance hard market generally comes about because insurance companies are having to generate additional premiums to contribute to their existing “pool” of payout money, to ensure that they can continue to make claim payouts and keep their promises to policyholders.

A lot of global circumstances contribute to a hard market. Things like rising replacement and repair costs, more claims, inflation rates, rising interest, more instances of auto theft, insurance fraud, natural disasters, etc., have all resulted in the insurance hard market.

On the other side of things, a soft market happens when times are good, and there is plenty of pool money to go around. Therefore, insurance companies can charge lower rates, offer higher limits, and offer more options for insurance policies.

What does this mean for Canadian policyholders?

Unfortunately, personal lines in Canada – i.e., both the property and casualty insurance industry – are still tight in the icy claws of the insurance hard market. What this means is that Canadians are seeing inflated insurance rates, especially with rates of climate change affecting frequencies of natural disasters and the number of people commuting to work now returning to pre-pandemic levels.

Record levels of inflation have come hand-in-hand with rising interest rates, which are causing tremendous economic ambiguity in Canada.

In 2023, personal property insurance rates have shown the highest year-over-year increase, particularly in the following provinces in Canada – and in order of highest to lowest:

• British Columbia has seen an average 8.7% increase.
• Alberta has seen an average 8% increase.
• The Atlantic provinces have seen a rough increase of 5.5%.
• Finally, Saskatchewan and Manitoba combined have seen a 6.5% increase.

With personal auto insurance, Quebec and the Atlantic provinces have both seen considerable rate increases, going up 9.6% and 9.5% respectively. Ontario has increased by 7.7% and Alberta has seen a relative increase of 6.3%.

Will the hard market ease up in 2023?

Canada’s inflation rate has started to come back down, and as of February 2023, it’s been the lowest since January 2022. The highest it was at in recent years was in June 2022, at about 8.1%. As of February, it’s at 5.2%.

So, with the current inflation rate going down, does that mean that the insurance industry’s hard market may finally start to lighten up? Unfortunately, most major insurance carriers are projecting that, no, despite inflation easing, the hard market is likely to be ongoing.

While inflation certainly is a factor that can help to contribute to an insurance hard market, other factors, like re-insurance costs rising, global disasters, interest rates, and insurance fraud are continuing to keep rate increases in the high-single-digit range in order for insurance companies to remain in pace with the cost of insured losses.

Key takeaways – what can we do to combat the insurance hard market in the year of 2023?

Navigating a hard market is difficult, especially when you’re a policyholder who really only glances at their policy 1-2 times a year for review or upon renewal. Having an expert broker in your corner to help is a huge asset at this time.

Here are some quick tips for combating the insurance hard market in the year of 2023:

• Manage risk – install storm shutters, security monitors, burglar alarms, etc.
• Review your coverage to ensure adequate protection. Doing so with a broker can help you to identify any gaps you may not otherwise have been aware of.
• Ask about eligible discounts. Consider raising your deductible, bundling policies, etc.
• Go paperless. Certain insurance companies may discount you for doing so.
• Try green. Green-certified homes and electric or hybrid cars can qualify for discounts.
• Shop around with the help of a broker.
• Always submit your claims within a timely fashion – current times may mean longer periods between submitting a claim and having it processed.

See our guides on how to save money on home insurance and how to get cheaper auto insurance.

And, as always, Excalibur’s team of Defenders are here to help you out when times are tough. We believe in the will of hard-working Ontarians looking to protect their own, and we’re on a mission to ensure that we can always be there to lend a hand when times are tough. We’re happy to help you find affordable insurance coverage while also answering any questions you may have during these uncertain times. Give us a call today.