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Tech Vendor Applied Science reported in Q1 2021 that Canadian commercial line renewal rates increased at a slower pace overall major lines at 7.68% compared to the same time last year which was at 9.02%. Below are some of the highlights from the report shared by Applied Systems.
Many of these smaller increases on renewals in Q1 2021 results were seen in the following commercial line categories of:
- real estate property
- business & professional services
- construction
- erection & installation services
- hospitality services
- retail services.
Applied Science stated these categories reflect directly towards the General Insurance Statistical Agency (GSIA) categories where all industry classifications are filed. This list is used for reporting by insurers in Canada by the GISA.
A breakdown of the lower premium renewal rates for each industry
Compared to other industries, the real estate property premium renewal rate change remained high during the Q1 2021 period. It went down from 11.42% in Q4 2020 to 10.26% this quarter. At the opposite end of the scale, hospitality services experienced a lower renewal rate change than other sectors. Their Q1 2021 rate was at 6.2%, down from 9.02% in the previous quarter according to the Applied Commercial Index released April 29, 2021. The index removes identifying items and combines several elements on the information it carries from almost 22,000 data transactions every quarter.
The COVID-19 pandemic has made it challenging for insurers and MGAs to provide affordable coverage to clients in the hospitality sector. This is especially the case for those who own hotels, motels, event venues, and restaurants and bars. According to Applied Science’s report, the average premium renewal rate over several quarters was at its lowest point since Q1 2019 landing at 5.44% in Q1 2021. This s compared to where it was in Q1 2020 at 10.79%.
A modest increase in the renewal rate was experienced for clients in construction, erection and installation services. Over the past few quarters, the average renewal rate premium was 9.11%. For this most recent quarter, it is down to 8.76%
The retail sector saw a decrease in the average premium renewal rate as well. Between Q4 2020 and Q1 2021, this rate fell from 9.55% to 7.12%, down more than a point-and-a-half (8.65%).
The premium renewal rate averaged 6.59% in Q1 2021 for business and professional services. This figure is down from 7.60% during the same time last year.
The new reality of premium rate increases and why it is occurring
Steve Whitelaw, Vice President of Industry & Partner Relations at Applied Systems gave his overall impressions of the importance of these lower rate increases in Q1 2021 than last year. Whitelaw stated that their data showed a decrease across most commonly placed classes of commercial lines businesses in Canada in 2021 than in 2020 but increases in rates will remain a reality for businesses to experience. The reason why Whitelaw believes there is a slower progression in the increase of rates has to do with the effects of the COVID-19 pandemic and the uncertainty of the economy. These issues are continuing to create challenges for small businesses, influencing renewal rates and risk advice insurers provide. Whitelaw said they will continue to refer to the index as a guide for how the industry is responding to macroeconomic changes.
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