Navigating the hard insurance market in 2025

Across Canada, premiums for personal lines are, unsurprisingly, on the rise. The Q3 2024 Applied Index Rating Report found that auto insurance premiums are averaging a year-over-year increase of 12.2%. Home insurance tells a similar story, averaging a year-over-year increase of 7.7%. 

Why is this unsurprising? Well, to answer that, we must look at the “melting pot” of factors contributing to the hardening insurance market and evaluate their impact on you, the personal lines insurance broker. 

In this article, we break down what the hard insurance market means for your clients, and showcase how your brokerage can overcome the challenging market to remain competitive going into 2025. 

How is this hard market impacting insurance clients?

The hard home and auto insurance market is creating many significant challenges for your clients. For example:

Insurance premiums are on the rise

Increasing claims, rising economic inflation and severe weather events are increasing insurance premiums for Canadians. This is causing higher levels of frustration as many feel financially strained by increased costs.

For brokers, they must spend more time explaining these changes to clients and find ways to justify the added expense, which can be challenging in a highly competitive market. To compound matters, rising premiums are also impacting broker commissions. According to a report from the Canadian Council of Insurance Regulators, commission ratios on auto insurance have dropped to 7.85% in 2022, falling from 12.64% in 2021. Commission ratios on property insurance have also decreased to 11.42% in 2022, compared to 18.25% in 2021. 

Decreasing insurance coverage availability

Paired with rising insurance premiums is decreased coverage availability. The Insurance Bureau of Canada reported that the “summer of 2024 now ranks as the most-destructive season in Canadian history for insured losses due to severe weather.” 

According to their data, in only two months (July and August), insured losses from floods, fires and hailstorms has pushed the 2024 year-to-date tally to more than $7.7 billion dollars. As a consequence, carriers are pulling out of offering clients personal lines of insurance against these high-risk extraneous forces. This means brokers have limited coverage options to present to clients, which is impacting retention KPIs.

More rigorous underwriting rules

Finally, many insurers are responding to the hard insurance market by introducing stricter underwriting standards. This results in more selective policy approvals, with fewer exceptions granted. 

For the insured, this results in stricter policy evaluations and less optionality when renewing insurance. For your brokerage, these more stringent evaluations are costing brokers in time, money and resources, which is impacting your ability to retain clients.

A hard insurance market: What’s the knock-on impact to your insurance brokerage?

According to Daniel Ignoto, Chief Insurance Officer at Billyard Insurance Group, brokers will likely face similar challenges in 2025 as they have in the years since the pandemic, thanks to a variety of factors: 

“We’re seeing a collision of inflation with a real auto theft crisis in the country, [and] in Ontario specifically. With the current economy, it has been challenging for all customers.”

The knock-on impact these market forces have on your brokerage is extensive. For example: 

1. There’s a rise in shopping behaviour, which is impeding client retention

Rising insurance premiums are causing clients to shop around for better deals. When it comes to policy requoting, if you’re not actively reaching out to clients to provide them with the best deal, you risk them shopping around themselves.

Increased shopping behaviours like this creates a “silent flight risk”, which can negatively impact your client retention and revenue figures. To address this challenge, you must find ways to proactively maintain and sustain your client relationships, ensuring your clients don’t beat you to the punch. 

2. There’s increasing demand for policy requoting and price comparisons, which impacts productivity

As a consequence of this rise in shopping behaviour, there is also an increase in demand for policy requoting and price comparisons. Quite simply, clients want to ensure they’re receiving the best coverage possible, and at the best possible price.

As clients shop around for better rates, there is heightened pressure on brokers to invest more time and resources servicing each client to ensure they not only get the best deal, but also receive that deal through you before they find it themselves.

3. There’s heightened service expectations, which impacts client satisfaction

With more turbulence – and therefore rising demand – clients also expect a heightened level of service. This includes an expectation of proactive, meaningful, and personalized communications that address their specific concerns and provide assurance. 

Clients want brokers to anticipate their needs, keep them informed about changes in policy options, and offer solutions swiftly to maintain trust and loyalty. It’s up to your brokerage, then, to exceed these expectations. If you don’t you risk losing clients to competitors who can better meet these service standards.

How can your insurance brokerage remain competitive in a hard insurance market?

As a broker, client experience can still act as your number one differentiator. Proactively finding the best deal for your clients, as well as providing top-tier service, are the two critical factors you can control as you look to bolster your PIF retention rates going into 2025. 

"Quandri's platform has significantly improved how our team operates. By automating the repetitive tasks involved in renewal reviews, our staff can now focus on work that requires more thought, leverages their skills, and enhances the overall customer experience” - Yvonne Jones, Director of Personal Lines, Cornerstone Insurance

But what’s equally as important is finding ways to retain control over your operating costs as you look to address this rising demand.

To achieve this, two strategic priorities are crucial:

1. Automate your policy requoting process

The policy requoting process is essential in a hard market. However, manually requoting all of your policies is time consuming, and often feels like wasted hours when no better policy options are available. 

Leveraging a platform that allows you to automate your policy requoting means you can requote as many policies as you want and swiftly offer competitive quotes when premium increases are detected. This enables brokers to proactively retain high-value clients by addressing their needs before they shop around and consider other options.

2. Expedite renewal reviews with data-driven decision making

In order to provide a personalized service to clients, brokers need to perform comprehensive renewal reviews, taking key client information, such as premium increases and gaps in coverages, into consideration. 

Integrating an AI-powered renewal intelligence platform into your existing broker management system (BMS) can streamline and enhance broker productivity by extracting and summarizing relevant policy information. This helps you manage rising client demands without incurring extra staffing costs, enabling your brokerage to remain not only viable, but profitable, during a hard insurance market.

By focusing on these strategies, your brokerage can successfully navigate the challenges of the hard insurance market and continue to remain competitive going into 2025 and beyond.