How Hard is a Hard Market?


Overheard at the grocery checkout recently:

“I guess all the insurance companies are raising their rates. I heard it on the news.”

It’s a true story. Rates are up all over the place. If you wondered about this and called your insurance provider to inquire, you may have heard that we are in what is called a “Hard Market.” It’s called a Hard Market because it’s hard as heck to get a lower rate.

Last year was a tough one for the insurance industry in Canada. That whole Climate Change thing is doing a number on actuarial data. It used to be that insurance companies’ actuaries could determine with a bit of certainty, just how bad the damage from that storm or flood or wildfire would be. But with climate change effects, there are more storms, more floods and more wildfires, and there’s no telling how bad it will be until it’s too late. So, all the insurance companies lost gobs of money last year. Those losses obliterated loss reserves, and made it so that rates had to go up, and new underwriting rules were put in place to make it harder to even get insurance. Hard…see?

And the insurance market will stay hard until the companies can recover from the mess that was last year. How long will that be? No one knows for sure. If outside forces like climate change and insurance fraud continue to challenge the industry in unexpected ways, it could take the insurance industry a very long time to right itself. And until then, things will remain HARD. And rates will continue to rise.

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