What does a ‘hard insurance market’ mean?

If you have insurance (or if you’ve recently been shopping for car or home insurance), you may have heard that the Canadian insurance industry is in the middle of a hard market. Even if you’ve never heard the term “hard market,” you may have experienced the effects of one as an insurance customer. We want to make sure you understand what a hard market means for the insurance industry — and, more importantly, how it could affect you.

What is a hard insurance market?

Insurance companies rely on premiums and investment income to pay claims — premiums alone aren’t enough, especially as claims continue to become more frequent and more expensive. So, in a time period with low investment returns and an increase in claim payouts, insurers have to take certain measures to make sure they’ll always have enough money on hand to protect their customers. These measures (which we’ll touch on shortly) make it harder for the average person to find affordable insurance coverage — leading to a “hard market.”

To put it simply, a hard market is a period of time when there is a high demand for insurance, but a lower supply of coverage available. Several factors can contribute to this kind of environment in the insurance industry, including an increase in severe weather events and catastrophes, a higher prevalence of insurance fraud, low investment returns, and inflation.

To make sure they have enough money on hand to fairly pay their customers’ claims during a hard market, insurance companies have to impose stricter rules when it comes to issuing new policies, limit the number of new policies they sell, and reassess the premiums they charge. It’s important to note that when insurance companies take these measures during a hard market, it’s not about protecting profits — it’s about making sure they’ll be financially secure enough to properly protect their customers.

During a soft market, a combination of higher investment returns and a decrease in claim payouts create the perfect conditions for insurance companies to lower insurance premiums, expand coverage, and relax underwriting rules to issue more policies.

How can a hard market affect home and auto insurance?

There are a few common ways a hard market could affect you as an insurance customer, whether you’re shopping for a new policy, trying to renew your existing policy, or making updates to your existing coverage:

  1. Your options may be more limited when shopping for insurance. During a hard market, insurance companies tend to enforce stricter rules about what kind of risks they will insure. This generally means fewer insurance companies are competing for new customers, as they’re working hard to make sure they can protect the customers they already have. In some cases, it could be more difficult to find affordable coverage — but your broker will do their best to help you.
  2. You may find that you’re unable to renew an existing policy or make changes to your existing coverage. If your insurer’s acceptance rules have changed and you no longer qualify for coverage when your policy is due for renewal, you may get a notice saying that your policy is not being renewed. If this happens, you’ll need to shop for insurance from another company with the help of your broker. The same applies if you’re trying to make changes to your policy at any point throughout the year (if you need to add coverage for something new you’ve purchased, for example). If your insurer’s updated acceptance rules mean you don’t qualify for the coverage you’re trying to add, your broker may need to help you find coverage from a different insurance company.
  3. You might notice an increase in your premium at renewal time. As insurers work to combat the effects of a hard market, they often need to increase premiums to help ensure they have enough funds available to pay claims. The hard market is just one of many reasons insurance rates are going up across the country.

    What can customers do during a hard insurance market?

    After learning how a hard market could affect you as a consumer, you might be wondering if there’s anything you can do to avoid some of the potential effects. Generally speaking, if you already have insurance, there’s probably nothing you need to do right now. But if you’re shopping for insurance or you find there are changes in your premium or coverage at renewal time, there are a couple of things you can do.

    Take advantage of insurance discounts and savings opportunities

    If your home or car insurance premium goes up at renewal time (or if you’re shopping for a new policy), be sure to ask us if you qualify for any discounts or savings opportunities.

    Here are some common home insurance discounts and common car insurance discounts that you can discuss with us.

    Claims-free discount
    Mature homeowners’ discount
    Multi-location discount
    Multi-policy discount
    Mortgage-free discount
    New home discount
    Renewal discount
    Alarm discounts
    Water damage prevention discount

    Anti-theft discount
    Away at school discount
    Conviction-free discount
    Driver’s training discount
    Graduated licensing discount
    Multi-policy discount
    Multi-vehicle discount
    Renewal discount
    Winter tire discount

    Work with an insurance broker you trust

    Brokers are knowledgeable advisors who understand what’s going on in the industry and know how to make sure you get the best possible coverage at the most reasonable price, no matter what’s going on in the market. A broker can help you through anything that might affect you during a hard market — and they won’t charge you extra for their support, either.

    If you’re shopping for a new insurance policy, have questions about your existing coverage, or you’re looking for support in navigating the hard market, reach out to us today.

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