Insurance costs increasingly unaffordable for most small businesses: CFIB

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This article was published 11/12/2024 (322 days ago), so information in it may no longer be current.

Higher insurance rates are likely constraining the economy, the Canadian Federation of Independent Business asserts.

Nearly three-quarters of Manitoba small businesses — 73 per cent — have ranked insurance costs among their top concerns, a report the CFIB released Wednesday highlights.

“Insurance costs are becoming increasingly unaffordable for businesses right across the country,” said Brianna Solberg, CFIB director of legislative affairs for Prairies and northern Canada.

More than half of the CFIB’s 172 Manitoba respondents said higher insurance payments have caused them to reduce business investment. Twenty-eight per cent shared they had lessened expansion plans.

“It’s pretty significant,” Solberg said. “This indicates that insurance costs are coming as a huge hit to our economy.”

The manager of Fionn MacCool’s Restaurant and Pub cited insurance as one of many elevated costs leading to the recent closure of its Regent Avenue West branch. Over the past seven years, the insurance bill had nearly doubled, Jay Kilgour said in September (when the Winnipeg eatery closed).

Another restaurateur, who declined to share her name, said Wednesday her insurance payments have increased 35 per cent year-over-year. It follows years without prices hikes, she noted.

She shopped around for new insurance, but didn’t find any better deals.

Hospitality, agriculture and manufacturing firms pay the most commercial property insurance costs, the CFIB report found. Transportation and construction companies follow suit with commercial auto insurance.

Nearly one-third of Manitoba respondents said their commercial property insurance premiums had increased by at least 10 per cent over the past year (from a period looking at March 2023 to May 2024).

Meanwhile, many businesses have opted to not make claims following incidents to avoid inflating insurance premiums. Almost half of the CFIB’s Manitoba respondents said they hadn’t filed a claim in the past year, Solberg said.

“It’s like a twofold increase,” noted Shaun Jeffrey, executive director of the Manitoba Restaurant & Foodservices Association.

Before the COVID-19 pandemic, a restaurateur might make a vandalism damage claim. Now, they eat the cost while paying higher insurance prices, he said.

Rates seem to be stabilizing after a couple years of “pretty large” increases, he added. Insurance risk levels across the board were quite high following the COVID-19 pandemic, Jeffrey said.

“It’s concerning that business owners are being charged an arm and a leg for something that’s so vital to their operations,” Solberg said. “It’s up to government and the industry to work together to make sure insurance rates are affordable.”

The average small- and medium-sized business would pay around $1,500 more in annual insurance premiums if handling a 10 per cent increase, the CFIB calculated.

Grant Wainikka, chief executive of the Insurance Brokers Association of Manitoba, called it “more important than ever” for small-business owners to consult with their insurance broker.

“There may be ways for small businesses to manage their insurance premiums without substantially impacting coverages,” he wrote in an email.

Several factors contribute to heightened payments, he noted. Severe weather events, inflation and litigation risk are among the influences he cited.

The CFIB is calling for an elimination of the retail sales tax on all insurance products for small businesses, a consistent regulatory environment established by provincial and federal regulators, and an accessible pathway for new insurers to enter the market.

Forty-three per cent of Manitoba respondents relayed they weren’t satisfied with available insurance options.

The CFIB surveyed its members between March 18 and May 9. It conducted another survey gauging entrepreneurs’ opinions on various topics, including insurance, in August. It released its 34-page report on Canada’s small-business insurance market Wednesday.

gabrielle.piche@winnipegfreepress.com