Everything You Need to Know about Canadian Insurance Industry in 2022

Small Business Canada

As Canada gradually emerges from the social and economic constraints imposed by the COVID-19 pandemic, a study of the previous 21 months reveals that the Canadian insurance industry has emerged reasonably undamaged. 

AON PLC, a prominent worldwide professional services organization, has published its quarterly Global Industry Insights Report, which delivers analytics on risk and insurance market trends and data-driven insights throughout the world to help decision-makers make better decisions.

According to the research for the fourth quarter of 2021, new forms of volatility are influencing the risk agenda for companies and insurance market trends, prompting the rising need to innovate and develop solutions to analyze, measure, and treat changing risk profiles. This includes:

  • Liability/Casualty: The major market is solid, as insurers prioritize profitable development. Rate rises are in the single digits for high-performing, non-US-exposed risks. The surplus market is being tested in high-exposure classes, which is affecting new capacity and renewal requirements. While litigation patterns in the United States and escalating loss costs are major determinants in pricing, capacity, facultative reinsurance rates, and circumstances are also essential.
  • Cyber: Market circumstances continue to be difficult. Pricing and terms are mostly influenced by controls and loss experience. A lack of comprehensive actuarial modelling from the beginning of the cyber marketplace has resulted in historic under-pricing; however, the more claims insurers pay, the better the claims data is collected, leading to more correct models reflecting higher prices.
  • Property: There are signs of stability emerging. However, certain rate pressure and capacity difficulties persist, especially for complex and natural disaster-exposed risks. Risks that are performing well are seeing moderate rate hikes.
  • Officers and Directors: Profitability problems, along with persistent concerns about the effects of COVID-19 on some industries, continue to produce a hard market climate. There is a greater emphasis on firms’ capacity to execute on their ESG (Environmental, Social, and Governance) responsibilities. Canadian market patterns are lagging behind those of the United States, with 2022 predicted to be Canada’s third year of rate rises.

In 2022, the Canadian insurance industry will continue to recover from the downturn. With many insurance companies trying to expand in 2022, this added pressure will translate into better terms for policyholders.


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What Are Some of the Global Highlights Include?

Among the global highlights are:

  • While the coronavirus pandemic was a major source of price hikes, cautious underwriting, and capacity restrictions, it has mostly abated, and volatility has normalized – with cyber goods being the significant exception. Certain economies, sectors, and organizations are still recovering. For instance, over 90 percent of C-suite leaders and senior executives surveyed in North America and Europe in September 2021 expected business conditions to improve in a year.
  • The cyber-world is getting more complicated and dynamic, with the severity of loss incidents and frequency posing new challenges for customers and insurers. Market conditions remain challenging, with strict underwriting and large premium and deductible hikes. According to the AON survey, cyber risk was the list topper and predicted future risk internationally, and it was in the top ten hazards across all regions, respondent types, and industries surveyed.
  • Insurer profitability is rising in several major market categories, notwithstanding severity and loss frequency, as well as a protracted low-interest-rate ecosystem, completely leading to changes in deductibles and risk appetite, as well as a move from portfolio rehabilitation to profitable development.
  • Insurers are increasingly lowering maximum limits, resulting in more layers of coinsurance per placement. Sub-limits for high-hazard hazards are being pushed. Deductibles have levelled down as rules have been implemented, but more modifications are likely in areas where underwriting performance stays stressed.
  • New capacity has set foot in the market and is being deliberately deployed with the goal of reducing volatility.
  • Coverage has recently been stabilized around most lines as a result of the exclusionary wording changes enforced on recent renewals. Sustainability and climate change are two more topics to keep an eye on when it comes to coverage.
  • ESG (Environmental, Social, and Governance) hazards are becoming increasingly important for insurers when they evaluate business partners and clients. Despite being seen as an undervalued risk as stated in the survey, ESG is expected to set foot in the top 15 hazards globally within the next three years.

The survey demonstrates the interconnectedness of emerging and old risks, as well as how firms are exploring new forms of volatility in the face of increased uncertainty. The Global Market Insights provides research on market dynamics around products and countries, as well as practical insight into how companies can utilize the data to make better decisions.


Let us look into the future and try to predict what the major and small insurance industry trends will be in 2022.

  • New Models and Customized Products

The digital economy will increase the relevance of on-demand, usage-based, and ‘all-in-one’ insurance lifestyle solutions. Customers will choose individualized insurance coverage over the existing one-size-fits-all options.

More than 80% of premiums paid by insurers are now wasted due to distribution costs. Digital models will render intermediaries in the overall insurance value chain, which are distinguished by their excessive reliance on human effort, obsolete.

In the long run, flexible coverage alternatives, microinsurance, and P2P insurance will become feasible possibilities. Risk capital will be provided directly to digital businesses by reinsurers, and regulatory frameworks will enable shorter value chains.

The insurer-insured relationship will be reimagined via lifestyle applications. As they integrate data from numerous sources, Application Programming Interfaces (APIs) will allow the creation of insights-driven services. A deeper knowledge of client habits will result in more accurate risk assessments, tailored premiums and value on a long-term basis for enhanced brand loyalty and customer experience, as well as fewer fraudulent claims.

  • AI and Automation for Claims Processing

RPA (Robotic Process Automation) and AI (Artificial Intelligence) will take center stage in insurance, owing to increased data channels, improved data processing capabilities, and developments in AI algorithms. Lemonade, for example, uses AI and behavioural economics as essential parts of its business strategy. While artificial intelligence removes paperwork and brokers, its behavioural economics skills prevent fraud, resulting in less time, effort, and expense.

Tyche, another InsurTech startup, has employed an AI-enabled claim likelihood model in underwriting to precisely evaluate risks and increase profitability.

Bots will become commonplace in both the front and back offices to automate policy servicing and claims administration in order to provide faster and more customized client care. For example, the virtual assistant of major auto insurance in the United States responds to consumer inquiries about plans and payments. Jim, Lemonade’s claims bot, examines and pays out property claims in three seconds or less. SPIXII, an automated insurance agent, engages with consumers using a mobile app and other communication platforms to assist in the acquisition of the appropriate policies.

Artificial intelligence and automation will have a significant influence on and enhance business results in areas such as customer experience, operational efficiency, cost optimization, emerging business models, and market competitiveness.

  • Advanced Analytics and Proactiveness

Premiums will become increasingly tailored as new sources of tech-enabled data like the IoT (Internet of Things), mobile-enabled InsurTech applications, and wearables become available. With the market of connected devices expected to develop rapidly over the next five years, Property and Casualty insurers will be able to extract live and precise data on individual customers’ loss risk. This will enable them to respond proactively with timely and highly tailored solutions.

Drone and imaging technologies will make it easier for insurers to collect high-resolution photographs for remote and accurate property estimates and analyses. Furthermore, insights will be derived from data set interactions in order to provide greater granularity in individual risk profiles and safeguard insurers from new risk exposures. 

Dynamically segmenting users and needs, modelling behaviours and identifying exceptions, adjusting policy rates, optimizing company strategies, and identifying new growth possibilities will all be done using advanced analytics. The scale may be expanded further by using automation, artificial intelligence, and machine learning to convert insurers into out-and-out active risk managers.

  • InsurTech Partnerships

InsurTech enterprises have seen considerable growth in vehicle, homeownership, and cyber insurance. Such rapid growth will encourage traditional insurers to either acquire technological skills or form partnerships with InsurTech firms. With millennials’ increased need for creative products and services, such partnership will become a vital requirement.

Overall, conventional insurers will benefit from faster outcomes in building a tech culture, while InsurTech startups will gain access to larger client bases, finance, and subject knowledge. It will give rise to novel models and income sources, resulting in increased profitability and lower operating expenses. Value-added services will improve customer experiences.

  • Mainstreaming Blockchain

The requirement for large amounts of client data to be handled in real-time by various insurance functions necessitates easy and safe data transfer across enterprises and their many stakeholders.

Blockchain technology enables safe data management across numerous interfaces and parties without compromising integrity. The system reduces operating expenses across the board, from underwriting and identity management to claims processing, fraud monitoring, and dependable data availability. Additional benefits of blockchain in policy administration include DAOs (Decentralized Autonomous Organizations) and smart contracts.

The trends discussed above suggest that new value worth billions of dollars can be produced for the insurance business. The prime aim is to understand how and when to capitalize on this potential by using existing and emerging technology.


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The Future of the Canadian Insurance Industry

In the corporate sector, we are witnessing an unparalleled rate of change. Insurance is no different. The insurance sector, as well as the federal and provincial agencies that control it, must stay up. Whether it’s dealing with the effects of climate change, digitizing businesses to fulfill customer demands, staying ahead of the curve on driverless cars, or cyber risk, the future is approaching quickly. To thrive, the insurance industry must confront it head-on.

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