After several years of high premiums and restrictive terms, the Canadian insurance landscape has been shifting in 2024 to provide more competitive solutions to businesses.
But the opportunity to seize on flattening — and even decreasing — rates across various coverage lines is not necessarily equal, as insurers continue to reward businesses that demonstrate sound risk mitigation efforts.
It’s paramount that businesses work with their broker not just to optimize coverage at cost-effective rates, but to also enhance and integrate effective risk management strategies that insurers will deem favourable.
Understanding the transition from a hard insurance market
You might be wondering what causes a hard market in insurance. The insurance market is cyclical and influenced by several factors, such as:
- economic conditions
- losses from natural catastrophic events, like floods and wildfires
- the overall financial health of insurers
Economic and political instability, supply chain disruptions, elevated inflation, growing severity of cyberattacks and increased frequency of natural catastrophes — to name just a few — created a perfect storm of sorts in the past few years.
This cumulated into a hard insurance market, and businesses had to grapple with strict coverage terms and rate hikes.
Yet, while such challenges persist today, insurers closed out 2023 with healthier profits and new firms entered the commercial insurance market, increasing competition among carriers. This led way for a shift towards a softer commercial insurance market, which is creating more favourable conditions for businesses.
For example, we’re seeing stabilized and, in some cases, decreased rates for:
- commercial general liability insurance
- commercial property insurance
- course of construction
- cyber liability insurance
- directors and officers insurance
As always, terms and rates are dependent on several factors including, but not limited to, industry, class of business, proximity to natural catastrophe zones and claims history
Brokers offer businesses an extra advantage in soft insurance market
During a soft market, brokers have more opportunities to leverage their experience, knowledge and connections to achieve favourable insurance solutions for their clients.
Here’s how:
Optimize gap coverage
Increased market capacity can empower businesses with greater choice to address coverage gaps and critical exclusion in their policies — which a broker can identify by conducting a thorough audit of an existing program.
A broker would then support a business in enhancing its existing coverage, negotiating better rates and expanding protection, where needed.
For example, cybersecurity is one of the most prevalent risks today, with IBM reporting the average cost of a data breach has reached $6.58 million CAD. Despite the consistent and persistent growth of cyberattacks, the CFC estimated in 2023 that less than 10% of Canadian businesses had a dedicated cyber insurance policy.
It would be advantageous for businesses to secure cyber insurance during a more competitive market to capitalize on better terms and rates.
It’s important to note, however, that competitive rates are still dependent on a business implementing strong cybersecurity measures.
Operational risk management
An organization’s ability to capitalize on a soft insurance market is still very much dependent on the level of risk they present.
Despite greater competition between carriers, underwriters still expect businesses to proactively manage their risks effectively and efficiently.
Brokers serve as a risk management partner, supporting businesses by helping to identify and mitigate potential risks that could threaten operations and profits.
For example, Acera Insurance offers several enterprise risk management services to help with your risk control process, including:
- Risk assessment surveys
- Risk control representation
- Building valuation
- Infrared thermography
Incorporating and enhancing risk mitigation efforts not only creates a safer environment for employees and customers, while protecting operations and property, but is also often rewarded with more favourable insurance rates.
Develop a long-term insurance strategy
The transition to a more competitive market is an ideal time for a business to work with a broker to develop a multi-year insurance strategy.
Brokers can help businesses avoid year-to-year fluctuations by locking in rates and/or negotiating favourable terms for multiple years before market conditions shift again.
This provides more predictable costs and eases budgeting, while also empowering businesses to implement sound risk management strategies that reflect their growth.
Some insurers may also offer better rates, broader coverage or enhanced policy features for long-term commitments.
By thinking beyond immediate short-term savings, businesses can gain more value, stability and security in their insurance programs.
Confidently navigate the competitive market with Acera Insurance
Acera Insurance works closely with businesses to ensure they’re well positioned to leverage soft market.
We’re in the business of protecting yours. Talk with one of our expert brokers today.