Understanding the “Hard Market” of Insurance

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Insurance is going through a ‘hard market’ right now. This means that all insurance companies are raising rates and charging everyone more. 

To make sense of this think of insurance as a team effort. The base of policy premiums paid are a part of a pool of money. Everyone makes contributions to cover for the mistakes of a few. 

When there is a tipping point and the losses experienced by insurance companies exceed the premiums paid we enter what is called a “hard market”.

If you take the term ‘aggregate’ you might think of sand. The actual definition is a whole made up of several elements. It is helpful to think of insurance markets in this way. 

Insurance companies are experiencing losses; in other words the are paying out more than they are taking in. This means the cost of premiums go up. 

Why is this happening?

Fraud: Fraud is a big reason for increased insurance costs.  The Insurance Bureau of Canada estimates that each driver in Ontario pays $236 in premium towards paying claims that end up being fraudulent.  Whether from fees for heath services never received, towing charges that never happened, to repairs that were inflated or never took place, insurance fraud is all too common.  This fraud is a big business in and of itself, which is why earlier this year the province introduced the Serious Fraud Office which would actively investigate and go after those involved in insurance fraud.

New technology is expensive to repair:  New auto technology is great, until it needs to be fixed.  Bumpers are no longer simply bumpers and your side view mirrors are more than mirrors which means that the cost to repair or replace them is increasing.  Sensors and cameras which assist with safety systems like Blind Spot Monitoring, Rear Cross Traffic Alert, Forward Collision Warning Systems, back-up cameras, adaptive cruise control, and even automatic emergency braking are typically located in areas that are susceptible to damage. Even a minor fender bender can result is tens of thousands of dollars in repairs due to all these expensive technologies.

Distracted Driving: Even with all the latest safety technology, accidents are still going to happen when the driver is distracted.  The frequency of collisions is increasing and some blame distracted driving.  Reports show that distracted driving is now the number one risk on Canadian roads contributing to 8 out of 10 collisions.

What should you do?

One of the major benefits of using a broker is they have the ability to shop many different insurance companies for you. There are many ways to make sure you are getting the best price. Different insurance companies will reward people in different ways. Talking to your broker and making sure you are with the right insurance company for you is the first step. Your broker will also be able to make sure you are getting all the available discounts which can save you a lot of money each year.

Just like all markets insurance is cyclical. A hard market will eventually become a soft market and vice versa. Here at Absolute Insurance Brokers we are happy to answer any questions you might have about dealing with a hard insurance market. Give us a call at 1-877-941-2266 or email us so we can make sure you are getting the pest price for your insurance protection.


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