Matt Hands, VP, Insurance and MoneySense
The first thing you need to understand is that P&C stands for property and casualty, these types of insurance companies are more commonly thought of as an auto and home insurer.
At its core, an insurance company is an underwriter, meaning they provide financial benefits due to of a sudden and unexpected event. You pay your insurance company a monthly or annual fee, and they promise to cover you for any losses you sustain in relation to your vehicle and property that's been insured.
P&C insurance companies has been around for hundreds of years. They include international giants like Intact, Economical, and Aviva.
You may not have heard of these companies, but you may know them by their direct agencies, such as Belair Direct, who is Intact Insurance, or Sonnet who is the direct seller for Economical Insurance.
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You can buy insurance from a broker or directly from the insurance companies' agent.
An insurance broker (e.g. RH insurance) is contracted by insurance companies to sell insurance for them. They help consumers compare the market and provide knowledgable advice to craft the best policy for the customer, while hopefully finding you the best rate.
There are many factors to insurance companies consider when offering an insurance rate to a customer, they include: personal details, demographic details, insurance history and the property or vehicle you want to insure. All these factors are put into a massive calculation that weighs the overall risk of your insurance needs to compute a rate thats specific to your situation.
Remember, no two insurance companies will rate you the same. They all have different underwriting criteria that they consider and their books of business can be completely different, so they are often interested in different customer types. This is why we always recommend to compare the market and get auto and home insurance quotes from multiple providers before settling.
FYI, if you decide to purchase through a direct insurer (i.e. Sonnet Insurance) via an insurance agent, keep in mind they will only be able to provide a quote from their company. You will need to individually go to each direct insurer to get quotes in order to shop that part of the P&C marketplace.
Insurance companies make money in two ways. First, charging you monthly or annual premiums to maintain your coverage and second, re-investing that money into asset generating returns (e.g. bonds, stocks).
The goal is to earn more than they pay out.
Insurance is all about risk which makes underwriting critical to success. The best insurance companies master the art of premium calculations. They carefully balance the cheapest rate enticing you to buy their product, while understanding the likelihood you'll make a claim leading to a payout.
For example, If car insurance companies take on too many high-risk drivers, they need to increase rates for all and charge more for any potential new customers too. This would hurt their growth for the coming year. Alternatively, if their client base, or "book of business," is full of low-risk clients, they can afford to take on riskier drivers. It's why insurance rates change all the time – it's not only about your neighbourhood, vehicle model, or insurance history, they need to manage their profits potential as well.
Personal insurance policies provide liability and damage coverage for your personal property and vehicle. This is your personal everyday coverage for your home or vehicle. It will not cover commercial use cases or speciality risk. This is the most common type of insurance coverage and what is often looked at as standard insurance coverage.
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Matt Hands, Business Director of Insurance
With 6+ years of experience at Ratehub.ca, Matt’s focus has been on growing its newest business unit, Insurance. He is a thought leader and a valuable resource to respected publications across Canada. read full bio
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