Are insurance prices going up?

What is a hard or soft market?

The insurance industry refers to their economic times as "hard" and "soft" markets. At the present time, we are experiencing a soft market. This has been the case for the past few years. Even with the insurance companies taking losses on their investments they cannot charge higher rates to catch it up. With our current economy, you would just go somewhere else. To increase revenues they are looking to write more business. This results in competitive rates and lower costs for your business and personal insurance.

Another factor is catastrophes. We have had some large water loss claims across Canada. With tornadoes, major hail storms and wildfires causing devastation we could see the companies trying to get back some of the money paid out in 2009. The catastrophes we have had tend to affect the personal insurance rates much more than the business or commercial insurance rates.

How does this affect me?

The comparatively lower prices will not last particularly in home insurance. The insurers may start to refuse certain classes of insurance. The companies may say they have too much of one type of risk.

Will it affect my business insurance?

Rates are not expected to show a big jump for commercial/business insurance. Your business insurance application may be turned down based on capacity. An example is condominiums under construction. There have been some large claim payouts for fire losses on these large buildings. At the present time some insurers have priced this type of risk at a much higher rate. Some insurers will only want the very "best of class".

What should I do?

The affect for the commercial insurance is that pricing may go up across the board for most classes of insurance but only a small amount. The companies are hungry for business right now so you may be able to negotiate better pricing. If your current insurer is not willing to give you a break then you might have to re-market.

Re-marketing means that you might have to do a bit of work with your agent or broker but you could end up with a significant savings. If your broker is not willing to help you in this area then it might be time for you to find a different insurance partner.

What about home and auto insurance?

This market affects your home insurance as well. There are some property insurers offering two year policies for home insurance. If the rate is good now,it is likely a good gamble that it will be an even better rate next year.

Do be aware that increasing your deductible will reduce your premium but significantly increases the amount that you pay if a loss occurs. Weigh this risk carefully. Talk to your broker or agent about two year terms for your personal insurance.

The insurance industry is looking at ways to minimize water damage claims. Your home insurance may be renewed with higher deductibles or more limited coverage. Check your policy over when you get the paperwork. As your broker or agent about limits on water damage claims and if there might be another insurance company that will better suit your needs.

I'm paying too much now for my business insurance!

Consider ways to help keep your business insurance rates at a reasonable level. Installing an alarm system or setting up and maintaining a good safety program, are examples of steps you can take to try and control the possibility of a claim. Shop around. Not all brokers have the same access to the insurance companies.

What about my vehicle insurance rates?

Automobile insurance rates have to be reviewed and then accepted by that province or territory's supervisory board. This gives quite a bit of control on the mandatory coverages such as liability (PLPD).

You will likely see greater increases in the collision and comprehensive/specified perils section. The CLEAR ratings are going up with an increase in claims and the cost of the claims. As vehicles have become more modular we are seeing that even the smallest of fender benders costing $1000 or more. Consider your insurance costs when purchasing a vehicle - one model can have much higher costs then another.

What is the insurance answer?

Be aware that claims now will affect your rates later. If you have a small claim then you might not put it through insurance. You need to talk to your broker or agent about your options and the effect of proceeding with a claim.

Do what you can to prevent a claim from occurring in your personal and business insurance. Talk to your broker or agent about different types of risk management. Some steps are relatively simple. Consider your risk of sewer backup and what measures you can take to prevent this from occurring. Discuss the implication of filing a small claim with your broker.

Insurance rates will go up and down as the market will bear. Be prepared to pay more for insurance if there is a major catastrophe. Talk to your broker or agent about what you can do now to help you minimize the impact of these increases.