Risk & Business Magazine Benson Kearley IFG Fall 2019 | Page 26

A TRANSITIONING MARKET
Learning To Swim In A
TRANSITIONING
INSURANCE
MARKET
W
e are all affected by
the weekly peaks and
valleys in gas prices, the
value of the Canadian
dollar, and even
monthly cellphone bills. The insurance
marketplace has its own volatility, albeit
on much longer cycles, and it impacts all
policyholders to some extent. No one is
immune to this watershed.
After 15 years of relative stability, the
insurance industry is in transition from
a “soft market”—one marked by low
premiums and high capacity—to a “hard
market”—which is exactly the opposite.
In a hard market environment, insurance
companies tighten underwriting
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standards, raise premiums, and exit
markets they deem too risky. Insurance
companies need to address declining
profitability caused by underwriting
losses, increased expense ratios, and low
investment income yields.
Emerging loss trends apply pressure to
insurer rating structures. These trends
include the following:
1) Catastrophic weather events from
climate change—including forest fires,
floods, droughts, and storms—have
resulted in billions of dollars in property
claims payouts over the past few years.
2) Auto repair claims have skyrocketed
as more complex car technologies have
driven up the cost of replacement parts
and labour in auto repair markets.
3) Fraud, in its everchanging form,
continues to deplete insurers’ reserves set
aside for legitimate claims.
4) Judicial inflation increases the amounts
of court awards in liability claims.
Some industry segments incur more
substantial rate increases than others
based on underwriting performance.
Your industry coupled with your own
claims experience will determine the rate
impact. To highlight the impact currently
experienced in the 2019 marketplace,
commercial property has been targeted
for rate increases. If a commercial realty