As of 2025, the insurance industry in Canada is facing several major challenges that are reshaping how companies like Erie Mutual Insurance operate, underwrite risk and serve customers.
Here are the top 8 biggest issues the insurance industry is facing in 2025 (and how they impact you):
1/ Climate Change and Catastrophic Losses
For the first time in Canadian history, insured damage from severe weather surpassed $8 billion in 2024. (1)
This record blew past the previous high of $6 billion in 2016, mainly a result of the Fort McMurray wildfires.
The issues:
- Higher premiums for home insurance, auto insurance and flood insurance, especially in high-risk regions.
- Reduced availability of coverage in disaster-prone areas (e.g., wildfire zones and coastal regions).
How this could impact you:
Some consumers are forced into government-run insurance pools with limited coverage and higher costs.
2/ Cybersecurity Risks
A whopping 72% of small and mid-sized business leaders reported that cybercriminals attacked their business in the past year. (2)
The issues:
- Limited availability and high premiums for cyber insurance (especially for small businesses and individuals).
- If insurers are hacked, customer data may be exposed, leading to identity theft and privacy concerns.
How this could impact you:
More exclusions and fine print in policies covering cyber risks.
3/ Inflation and Rising Claims Costs
Inflation rates in Canada are down as of late compared to the spike in 2022 (3), however, they remain higher than a decade ago, and some fear it may not improve.
The issues:
- Premiums are increasing across most insurance types, particularly health, home insurance and auto.
- Potential for slower claim processing as some insurers may scrutinize costs more closely.
How this could impact you:
Consumers may need to pay more out-of-pocket due to rising deductibles and reduced coverage limits.
4/ Regulatory and ESG Pressure
The issues:
- Insurers may exit or reduce investment in certain industries (e.g., fossil fuels), potentially affecting life insurance policyholders tied to those investments.
- ESG-focused products may offer limited choice but higher cost for those not aligned with sustainable or socially responsible criteria.
How this could impact you:
Some consumers appreciate ESG integration; others may see it as unwanted politicization of insurance.
5/ Digital Transformation and InsurTech Disruption
According to the National Association of Insurance Commissioners (NAIC) 88% of auto insurance companies reported that they already use or plan to explore using AI in their operations.
How this could impact you:
Consumers benefit from more digital tools, such as app-based claims, instant quotes, and AI-powered chat support.
However, older or less tech-savvy consumers may feel excluded or overwhelmed by these changes.
There are also understandable data usage concerns revolving around increased personalization that often comes at the cost of more data collection.
6/ Changing Demographics and Expectations
For the first time, as of July 1st 2023, millennials born between 1981 and 1996 comprised a greater number of people in the Canadian population than baby boomers born between 1946 and 1965. (4)
How this could impact you:
Younger consumers entering the market may enjoy more flexible, usage-based insurance models (e.g., pay-per-kilometre car insurance).
Older consumers may struggle with shifting away from traditional in-person service.
The gap in coverage literacy is widening, especially for first-time buyers navigating digital-first platforms.
7/ Talent Shortage and Aging Workforce
As we see in the above, millennials are becoming a larger portion of the Canadian population who, compared to the baby boomer generation they’re replacing, are less likely to pursue a career in the insurance industry.
The issues:
- Slower customer service or errors due to understaffing or inexperienced workers.
- Fewer human advisors are available, which can make complex decisions (like life or disability insurance) harder for consumers.
How this could impact you:
Longer wait times for quotes, claims, and policy updates.
8/ Geopolitical Uncertainty
What a crazy world we live in sometimes. Need we say more?
The issues:
- Travel insurance premiums are rising, and more destinations are excluded from coverage.
- Higher volatility in investment-linked policies (e.g., variable life or annuities).
How this could impact you:
Increased caution around international property, cargo, or business insurance.
Are any of these changes within the insurance industry impacting you?
If they haven’t yet, they soon will.
Erie Mutual Insurance proudly serves the commercial insurance, farm insurance, home insurance and auto insurance needs of members throughout Southern Ontario including Haldimand, Niagara and Hamilton.
Please don’t hesitate to contact us with any questions you may have about this or any other topic related to your insurance.
SOURCES:
1. catiq.com
2. kpmg.com
