Trump Tariffs Will Shake Up Canada’s Insurance Market

Insurance carriers will face many difficulties from the tariffs due to the added complications introduced by inconsistent supply chains and increased repair or replacement costs. Here are some of the effects the tariffs will have on insurers:

• Reduced profit margins: Higher costs for raw materials, such as steel and aluminum, directly translate into more expensive claims. These increased costs will affect insurance carriers first, decreasing short-term profits.
• Complex risk assessment: Tariffs introduce uncertainty into the economy, which may complicate risk assessment and underwriting processes. Insurance carriers might find traditional risk models outdated or insufficient, prompting them to look for new analytics, predictive modeling tools, and technologies to adapt to volatile market conditions.
• Increased operational costs: Carriers might be forced to spend more on training, technology updates, and additional resources to minimize the effects of the tariffs. These additional investments are essential but can further strain profitability, especially for smaller insurers or those with tight budgets.
• Strain on customer relationships: When tariffs indirectly cause insurance providers to raise premiums, they may face challenges in customer retention. Insurers must maintain profitability while delivering competitive pricing and customer satisfaction, often requiring more strategic communication and improved customer relationship management practices.

Unfortunately, the cost of tariffs will often be passed onto the consumer, affecting millions of Canadians needing insurance. Here are the most significant ways these tariffs will affect policyholders:

• Rising insurance premiums: Tariffs increase the costs of repairing and replacing insured items, especially vehicles and properties. Insurance companies, in response, typically raise premiums to compensate. Higher premiums disproportionately impact households and small businesses, potentially causing financial strain and leading policyholders to reduce coverage or forego certain types of insurance altogether.
• Reduced or limited coverage options: Insurance providers may begin limiting available coverage options to manage their increased risk exposure. Consumers might face higher deductibles, lower policy limits, or exclusion of certain coverages like wildfire protection, potentially increasing their financial vulnerability.
• Delays in claims processing and repairs: Supply chain disruptions resulting from tariffs mean delayed delivery of necessary replacement parts, leading to prolonged repair timelines. This causes substantial inconvenience for policyholders, increases customer dissatisfaction, and negatively impacts daily lives or business operations.
• Difficulty in accessing insurance: In extreme cases, certain insurance products may become more challenging to access due to insurers’ cautious response to market volatility. Businesses and consumers with perceived higher risk profiles could struggle to find adequate and affordable insurance coverage.

With inflated production costs, the overall market price of vehicles rises, leading insurers to pay substantially higher total-loss claims after an accident. The increased cost to manufacture replacement parts can also lead to a sharp rise in repair expenses, compelling insurance companies to raise premiums. Supply chain interruptions from tariff impacts lead to prolonged waits for parts necessary for vehicle repairs, forcing policyholders to suffer extended periods without their vehicles after a loss.

Insurers may need to perform frequent property-value reassessments to reflect accurate replacement costs due to tariff-related inflation. Increased volatility in property valuations can complicate underwriting decisions and potentially lead to disputes with policyholders regarding property valuations at claim time. Home insurance rates are up 5.28% in Canada in 2025 compared to last year. Higher replacement cost of the houses + increased amount of natural disasters in recent years have the potential to create a perfect storm for property insurance premiums to rise even more in the near future.

Tariffs cause disruptions in supply chains and operational delays, significantly impacting business continuity. Businesses facing interrupted operations or supply disruptions might file increased business interruption claims, forcing insurers to raise premiums and enforce stricter terms and conditions.