Difficult and expensive for companies to insure in Québec
Updated: May 30
The issue of commercial and business insurance in Québec has long been more complicated than in the rest of Canada, if not in all of North America. The Civil Code requires broader and more comprehensive coverage than in other jurisdictions. The small number of insurance companies has also always had an impact. However, the situation has never been worse than it is today. The high premiums, and difficulties in even finding business insurance, are weakening Québec’s competitiveness with neighboring jurisdictions and limiting economic growth.
In addition to being legally unique with its Civil Code, Québec also has the distinction of being the only predominantly French-speaking jurisdiction in Canada. Historically, this has limited the number of insurance companies offering their products in Québec. This situation is particularly acute for commercial and business insurance. The problem is exacerbated by recent insurance mergers and acquisitions, and the fact that more and more legal documents must be translated to be valid in Québec.
Combine these two factors with a pandemic outbreak, and an economic recovery that is straining small businesses, and it makes for a very negative cocktail for the profitability of Québec's business community. What's more, the number of new risks to be insured, such as cyber risk or identity theft risk, continues to grow, and with it, unaffordable premium increases.
It is not uncommon for insurance bills to double or even triple over the previous year. In some cases, and for some types of businesses, there are now "no insurance" zones, regardless of past claims or willingness to pay. In many other cases, there is only one insurer available in a given area. This lack of competition drives up the premiums that can be charged.
There are several possible solutions, though none is easy to implement. Allowing more time to meet certain language requirements would be welcome. It takes longer to translate tens of thousands of pages of legal documents than it does to translate a website. The rules could reflect this reality, which would allow insurers to offer new policies and change existing ones more easily.
The Civil Code could be amended to limit liability in the case of companies with multiple franchisees or multiple places of business. One of the reasons the rest of the country is better served is precisely this limitation of liability. There is nothing stopping Québec from allowing this standard. Not only would premiums go down, but more insurance companies would be attracted to Québec because of the simplified process of setting premiums.
Finally, through its authority over the AMF (Québec’s financial services regulator), the Quebec government could eliminate or reduce requirements to insure for some risks, as the extent of these risks are sometimes misinterpreted by the regulator.
Until the situation improves -- which is unlikely to happen on its own – the government should consider the special challenges of Québec businesses, and assist them in finding their mandatory insurance at the best possible price. The way to do this is to redefine the regulatory framework, to allow the supply side to improve and market mechanisms to work well.
When a business does not open or expand in Québec, that represents a loss of potential tax revenue for the government. Business income that is spent on higher-than-necessary insurance premiums cannot be taxed or reinvested for growth. By alleviating the insurance challenge for Québec businesses, the government could also help itself, its economy, and its citizens.