An insurance policy is a complex financial tool that pays a policyholder subscribed sums contingent upon the occurrence of insured risks or events. The purchase of home insurance, car insurance, life insurance, medical insurance is pervasive in the Canadian economy. According to data, the insurance services industry represents 0.76 percent of total services and 0.46 percent gross domestic product. This article analyzes the structure of insurance in Canada, demand for insurance, production of insurance services, and the role of insurers in the industry.
The structure of Insurance in Canada
The insurance sector in Canada includes:
• Life (group life, pension fund management, and individual).
• Property and casualty (motor vehicles, real estate, and liability).
• Accident and sickness (dental care, general healthcare, and disability).
In 1985 the private sector elements of the industry in terms of premiums contribution were life insurance at 49.1 percent, property, and casualty at 42.1 percent, while accident and sickness accounted for nearly 9 percent.
Financial intermediaries
Insurance firms have created facilities to pool risks that offer insurance policies, purchasers, the financial protection they need. For instance, its industry held 30 percent of all mortgages in Canada to about 13 percent in recent years. The decline is attributed to changes in NHA mortgages plans from 25 to 5-year terms.
Demand for insurance
In Canada, as of 1985, there were a total of 167 life insurance firms in operation. Entry into the market is reasonably straightforward. At the time, the largest four firms in the market writing property and casualty managed a portfolio of 18.1 percent of net premiums.
Between 1971 and 1985, CPI grew annually by 8.2 percent, while tenant and homeowner insurance prices increased by 12.3 percent and 13.1 percent, respectively. The prices of insurance policies have risen over the last two decades. The inflation rates of the two policies have been one and half times faster than CPI. It was noted that auto insurance policies increased in line with CPI while life insurance grew annually about half as quickly as the CPI.
Changes in product demand caused by tax reviews have pushed customers to shift away from life policies to term insurance. It has had a ripple effect resulting in smaller amounts of funds under the control of life companies who now have a reduced asset book.
Production of insurance services
Over the last decade, the pace of product innovation has increased. As a result, Canadian life insurers have been successful in exporting their operation to other countries. As a result, global premium income from foreign countries accounted for 40 percent of the market share for companies operating in Canada.
