Are you currently rate shopping for car or home insurance? Chances are you may be quoted rates that are not as high as you expected. As Ontario has been in a hard market for the past few years, premiums have been higher than usual. In 2025, however, the market is softening. So, what does this mean? Read on to learn more about what a hard market is and what is in store for insurance.
What is a Hard Market?
A hard market refers to a time in the insurance industry when premiums rise sharply and underwriting becomes more restrictive. This is the result of catastrophic claims, inflation, and lower insurer capacity. Therefore, insurers become more selective, often restricting coverage or increasing deductibles.
Causes of the Current Hard Insurance Market
A hard market refers to a time in the insurance industry where rates are higher and underwriting criteria are stricter. This stems from the fact that the insurance industry is currently paying out more in claims than it collects in premiums. As a result, many insurers are losing money.
Lack of Capital in Insurance Companies
When lines of business (personal or commercial) aren’t performing well, it results in a loss of capital. If these lines of business underperform for some time, there isn’t enough capital to offset financial losses. In the end, companies can’t recuperate capital.
Insurance Payouts for Claims Made
For example, Canada’s record-breaking $9 billion in insured catastrophe losses in just 24 days during the Summer of 2024 led to tightened terms and rising rates.
Weather Related Insurance Claims Have Increased Dramatically
The 2024 total is nearly triple the total insured losses recorded in 2023 and 12 times the annual average of $701 million in the decade between 2001 and 2010.
New Technology in Cars
This makes them much more expensive and complex to repair. Factors driving the increase in wait times include technician staffing, supply chain disruptions, inflationary pressures, and repair backlogs.
Insuring Green Cars
Electric vehicles (EVs), despite compact size, tend to cost more to insure because of specialized components and repair complexity. Premiums for compact EVs often exceed CAD $2,300 annually.
Insurance Fraud
Due to a small minority of people who try to game the system with false underwriting information (i.e. address fraud), false and/or staged claims and inflated payouts. Unfortunately, we all pay for fraud.
Why Does a Hard Market Matter to You?
Over the past few years, insurance rates have risen across all sectors, including auto, home, and commercial policies. These increases are largely tied to tighter underwriting standards, which means insurers are now less flexible than they may have been in the past. Many direct insurers are actively reviewing their existing portfolios, which can lead to significant premium hikes, reduced coverage, or—in some cases—non-renewal of policies. This shift is not just affecting policyholders; it’s also impacting brokers. Some brokerages are losing contracts with insurers or being asked to re-underwrite parts of their business, which ultimately results in fewer choices for their customers.
At the same time, some insurers are stepping back from certain types of new business altogether or reducing the size of their portfolios. For consumers, this means it’s more important than ever to have access to a broker with strong insurer relationships and broad market access. If your current insurer is unable to meet your needs, you may need to shop around. In today’s environment, having a knowledgeable, well-connected insurance broker, like the ones at isure, can make all the difference in finding the right coverage at the right price.
What Is a Soft Market?
A cyclical change between hard and soft markets fluctuates every six to eight years and leads to higher insurance premiums and more stringent underwriting practices. A soft market is characterized by lower premiums, relaxed underwriting, and more flexible terms. This type of market is driven by expanding insurance and reinsurance capacity, improved profitability, and heightened competition. In Q1 2025, global insurance rates fell for a third consecutive quarter. Property rates saw a decline of 6%, while P&C composite rates are down 3%.
Market Cycle Transition: 2019–2025
From 2019 to 2024: The insurance industry experienced a prolonged hard market, driven by several compounding factors:
- The frequency and severity of natural catastrophes increased significantly, leading to higher claim payouts.
- At the same time, inflation drove up the cost of vehicle repairs, replacement parts, and property materials.
- Compounding these challenges were low investment returns, which reduced insurers’ profitability.
- In response, insurance companies implemented widespread rate hikes and adopted stricter underwriting practices, making it more difficult for both individuals and businesses to secure affordable coverage.
In Early 2025: The market shifted toward softness. Increased investment returns (boosted by higher interest rates), new reinsurance entrants, and recovered underwriting profitability all contributed.
Key Drivers of the Shift
The insurance market is starting to shift away from the hard market conditions of recent years. Insurance companies are now more focused on growing their business, not just covering losses, which has helped them become more profitable. There’s also more competition, as new reinsurers have joined the market and this increased capital injected competition and cushion into the market. In addition, rising interest rates have also boosted investment income, allowing insurers to generate stronger returns on premiums held in reserve
What This Means for Policyholders
For customers, this means there may be more options and better rates available. Be sure to contact your isure broker to take advantage of this softer market by starting renewal conversations early and benefiting from a more competitive market. However, people with past claims or properties in areas prone to disasters may still face higher costs or fewer coverage choices. Overall, things are improving for many policyholders, with more coverage options in areas like cyber, property, and liability insurance. Overall, this shift from a hard to soft market signals a cautiously optimistic environment for many insured parties.
In today’s shifting market, commercial policyholders are seeing broader coverage opportunities across several key lines, including cyber, property, and liability insurance. As insurers become more competitive, businesses may benefit from improved access to coverage and more flexible terms. However, it’s important to note that commercial lines are not immune to some risk. Certain high-risk sectors—such as properties located in catastrophe-prone areas—may also face stricter underwriting, higher premiums, or limited capacity. While the overall market is softening, risk exposure continues to play a major role in how insurers price and structure commercial policies.
What to Expect From Your Insurance Broker During the Hard Market
- Transparency: It’s important that your broker keeps you abreast of any developments (e.g. the fact that you will most likely see a rate increase, if your policy will be renewed, etc.), help you navigate the market and keep you informed of any pertinent policy changes.
- Advocacy: It’s a rough time in the market, but your broker will work with insurance companies to ensure you’re getting adequate coverage and the best rate.
- Honesty: Discuss your options with your broker to determine what options make the most sense for you.
After several tough years, the insurance market is starting to settle down. While inflation, big weather-related claims, and climate risks are still a concern, they’re being balanced out by stronger profits and more competition among insurers. At isure, we’re all about working with you and being forthcoming with changes in the industry. If you have any questions, call or email us. Let’s shop around together to ensure you have the most appropriate and affordable coverage during this time.
Car insurance in Ontario remains among the most expensive in Read more
Insurance in Canada is changing fast, and 2026 will bring Read more
Wondering what impacts your home insurance premium in Ontario? From Read more
