Why Insurance Rates are Rising in 2023 - A Broker's Perspective
Filip Ambroziak, an insurance broker with 9 years of industry experience, shares his thoughts and insights on why insurance rates are rising a faster than normal speeds in 2023.
MISSISSAUGA, Ontario, March 9, 2023 /PRNewswire-PRWeb/ -- Filip Ambroziak has been in the insurance business for almost nine years and has seen both exceptionally hard markets along with enjoyable soft markets. The average insurance market cycle is about 5 years long.
A soft market is one where all insurance companies are competing for business. They try to offer the lowest premiums, have lax underwriting rules, increased capacity and their main goal is market share. This is excellent for clients as insurers are willing to work with them and prices are usually great. "I remember a time many years ago where I would be able to offer clients who had no prior insurance quotes comparable to what a long time loyal client pays today. Those who have no prior insurance today are looking at prices in the $400's if they are living in the GTA ". This was about 6 years ago, back in 2016.
So what has changed?
Fast forward a few years to 2018 and that is when pricing began to increase at a slightly higher pace. Insurance companies became stricter and many decided to stop accepting certain risks all together (reduction of capacity/ strict underwriting criteria). This became a very tough time for insurance brokers as they had to work with more alternative and high risk insurance companies to find affordable rates. According to Ambroziak, this was the beginning of the hard market. Opposite of a soft market, the hard market means insurance companies no longer have the goal of gaining market share, but instead their goal shifts to reducing losses and increasing profits.
One of the biggest problems when trying to increase market share quickly, is that claims follow it. When companies have too many claims and the premiums aren't enough, they switch their focus.
So what is happening in 2023?
This is where we need to look at the pandemic. In the first quarter of 2020, the pandemic was announced and all companies began to adjust. Many insurance companies did assist their clients during this time. Some offered discounts while others offered refunds. The biggest help that insurance companies did which was likely unnoticed is they locked rates for a few years. Most companies did not raise their premiums for about 2 years while the pandemic took place. Many clients would notice that if their insurance did go up, it was likely due to their own individual rating criteria (a speeding ticket or at-fault accident). Rates went up very little during that time.
This unfortunately has come to an end and now towards the end of 2022 and moving into 2023, premiums are being raised. Insurance companies are only now adjusting for the extreme inflation we saw over the last three years which is why many policy owners are seeing 10-15% raises on their renewals for this year.
To summarize, inflation in other businesses is adjusted for almost immediately. Since insurance premiums are made based on statistics, insurance companies can only adjust for inflation once the numbers are in which often takes several years. This is where we are now. Along with a delayed inflation adjustment, the loss ratios do not looks so great.
Car thefts are on the rise and have increased so much, that certain insurance companies such as Aviva Insurance are offering free vehicle anti-theft recovery installations. This unfortunately has a negative effect on insurance premiums and unless car thefts slow down, rates will continue to be adjusted for the losses.
Filip believes that these rate increases will continue for the next few years until we enter a soft market again which will happen. The question that remains is when.
Is there any good news?
As someone who watches the insurance market very closely, Ambroziak does believe that we will enter a soft market in the next 2-3 years. He already noticed a slight drop with car prices which means insurance payouts may soon drop as well. He also mentions that with higher interest rates, insurance companies may balance out their loss ratios with higher investment returns. This does take several years to take effect.
What can be done now?
Filip says the best thing, as always, is to shop around. If your insurance renewal has not gone up very much from last year, you're in luck as new business rates have been much higher than renewing customers from his own analysis. However, if you have seen a significant increase, its a great idea to get in touch with a broker and get a few quotes from reputable insurance companies.
It's also a great idea to review your current policies and see if any discounts are missing that you are eligible for. Filip Ambroziak is an insurance broker in Mississauga but is licensed to sell auto, home, commercial, travel and life insurance anywhere in Ontario. If you would like a quote from Filip, you may call him at 416 803 2113 or email him at [email protected].
Media Contact
Filip Ambroziak, Ambroziak & Rao Insurance Brokers, 1 4168032113, [email protected]
SOURCE Ambroziak & Rao Insurance Brokers
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