Ontario’s Finance Minister is urging insurers to stop discriminatory pricing in commercial business policies as almost half of Canadian small businesses report their insurance costs are creating financial pressures during the global COVID-19 pandemic.
“Our government has been keeping a close watch during this pandemic to ensure insurance companies are meeting the needs of small businesses during this unprecedented time,” Finance Minister Rod Phillips told The Globe and Mail in an e-mail.
“My message to insurance companies has been clear: I expect you to treat your customers fairly.”
Since the onset of COVID-19, the Canadian Federation of Independent Business (CFIB) – an association with 110,000 small-business members – has seen a growing number of small-business owners contacting the association’s hotline with concerns about the rising cost of insurance.
About 48 per cent of small-business owners say their insurance costs are creating financial pressures on their overall business, according to a recent CFIB survey.
Most businesses require commercial business policies, covering policyholders for fire, theft, liability and, in some cases, business interruption. Some Ontario bars and restaurants have seen premium increases of as much as 300 per cent this year when they went to renew policies, while others have been refused insurance entirely.
The hospitality sector is only one group that has experienced premium rate hikes among small businesses. CFIB chief executive officer Dan Kelly says manufacturers, professional services firms, and transportation companies – such as taxis and the trucking industry – have all reported insurance concerns when it comes to renewing existing policies.
“Some of this was happening prepandemic,” said Mr. Kelly in an interview. “We were seeing an uptick in insurance premiums and the [insurance] industry was letting us know that we were moving into a hard market.
“But the timing couldn’t be worse for our members. Businesses have more limited revenue than ever. Not only are you dealing with your sales going off a cliff, but your costs are rising dramatically. That is a recipe for an impossible business scenario.”
While some insurance brokers in Ontario have been told policies are being cancelled because of concerns around the legal risks if a patron contracts COVID-19 while at an establishment, Mr. Kelly says there doesn’t appear to be “any evidence of COVID events being linked to the rising cost of insurance or the lack of access [to insurance].”
In discussions with insurers and other industry groups, Mr. Kelly says he heard several reasons why rates may be on the rise, including lower interest rates and events related to extreme weather. In addition, he has been told that the rate changes could be a result of insurers having to rebate millions of dollars to customers during the pandemic.
“But there have been very few insurance claims made by commercial clients during COVID-19 and everyone is still paying their premiums,” adds Mr. Kelly. “So I am struggling to understand their reasoning.”
Mr. Phillips, along with Toronto’s Mayor John Tory and the Financial Services Regulatory Authority of Ontario, have had discussions with several insurance companies to “identify solutions” and the Finance Minister says “nothing is off the table” when it comes to the options they are looking at.
Last week, Toronto City Council passed a motion to support the Ontario government in any actions it takes with insurers to prevent “astronomical” increases in premiums. During a news conference, Mr. Tory asked insurance companies to put a “pause” on any cancellations or rate hikes until “the pandemic is behind us.”
Mr. Phillips told The Globe he will be “closely monitoring” the situation to ensure companies are adhering to a “high standard of conduct,” which includes monitoring any unreasonable settlement of claims, unfair discrimination in price for the same risk or deceptive marketing.
Earlier this month, the Dakota Tavern, a popular live-music venue in the west end of Toronto, was told it would not have its insurance renewed on Oct. 18, when the policy expires. Owner Stephen Reid is currently in the process of looking for a new policy and says he is “optimistic” that his business will remain open.
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