Underinsurance is quietly undermining the financial stability of countless Canadian businesses. With property values surging and environmental risks escalating, too many are left dangerously exposed due to broker oversight.
Commercial insurance rates in Canada rose by nearly 20% in 2023, with B.C. seeing some of the steepest increases due to wildfire threats and flood-prone infrastructure, according to a CBC report. Insurers are tightening coverage requirements—but many brokers still aren’t initiating the necessary conversations or property revaluations.
Ana Mello, commercial account manager at Summit Commercial Solutions, said that complacency and auto-renewals are fueling this crisis. With over a decade of experience advising high-risk clients, Mello laid out how routine evaluations, tailored solutions, and transparent broker-client dialogue can be the difference between protection and financial ruin.
“We often see clients coming to us from other brokerages, and they definitely don’t have the property limits updated,” Mello said. Experienced business owners, she noted, are frequently left exposed due to brokers failing to conduct regular reviews. This oversight can lead to severe financial consequences in the event of a claim.
Routine property evaluations are essential. “One of the things that we always do, for example, for buildings—we always like to run a property evaluation,” Mello said.
These assessments include checking construction types, recent updates to roofs and plumbing, and other structural factors directly influencing insurance premiums. “If it’s more updated, the premium is going to be a little bit lower,” she said.
Evaluations serve more purposes than just pricing—they are crucial for ensuring coverage availability. “Some markets don’t accept older buildings,” particularly in wildfire-prone areas like British Columbia, Mello said.
In these cases, brokers must swiftly identify alternative solutions, including professional appraisals. “We can also hire an appraiser to do the building valuation. Some clients want a professional doing the valuation,” Mello said.
Proactive reviews cannot be compromised. Mello noted that automatic renewals often create complacency. “I see a lot of the clients—they’re extremely underinsured because their brokers are just auto-renewing their policies year by year, and not having those conversations with them,” she said. Annual policy reviews are mandatory—not optional.
“When the renewal is coming up, make sure you’re meeting with your client,” Mello said. Even small updates, such as new HVAC systems or increased inventory, substantially alter risk profiles. Brokers must maintain ongoing dialogues to ensure accurate and sufficient coverage.
This vigilance extends beyond physical assets to business interruption coverage. Mello emphasized the importance of correctly calculating potential business losses. “We usually ask the client to fill out a profit worksheet,” she said, highlighting that many businesses aren't aware of their actual exposure. “We see that they’re being underinsured $1 million or more sometimes.”
Environmental risks add complexity. In British Columbia, increased wildfires have caused carriers to restrict coverage for framed buildings. Similar coverage challenges exist in Atlantic Canada due to flooding, and across regions dealing with older properties containing asbestos.
Premium volatility necessitates negotiation skills. “We’re definitely seeing fluctuations in premium according to the construction or the plumbing, the heating,” Mello said. Brokers must advocate for clients effectively. “If they work on those updates, we can definitely negotiate with the insurance companies, saying, the building is old but it’s being renovated.”
Complex cases may require innovative solutions like risk subscription. “We can subscribe [to] the policy,” Mello said, detailing how brokers might split coverage among multiple insurers to manage risk exposure effectively.
In times of economic uncertainty, effective communication becomes paramount. Businesses facing budget constraints may consider cutting coverage, making broker-client dialogue critical.
“You’ve got to prioritize the risks that they’re exposed to,” Mello said. Adjusting deductibles can help manage premiums, provided clients fully understand the implications. “We’ve got to make sure we’re explaining what increasing or decreasing this deductible means to them,” she said.
High-risk industries, including construction, manufacturing, and retail, demand particularly close attention due to fluctuating asset values and rising operational costs. Regular consultations remain vital. “We usually apply a 3-5% inflation on those property limits,” Mello said.
Automatic renewals must be actively managed. “If the renewal is being automatically generated, you’ve got to make sure you’re going back to the insurance company and ask them to increase those property limits,” Mello said. Contractors, she highlights, are especially susceptible to underinsurance.
Business protection extends beyond property alone. Liability, professional liability, and cyber coverage are increasingly essential. “Almost every business should have cyber now,” Mello said, reinforcing the need for comprehensive understanding of each client's operations.
Ultimately, effective brokering hinges on personalized service. “Each client is a different client,” Mello said. Building robust relationships through consistent communication—be it phone calls, meetings, or site visits—is crucial.
Even as automation gains traction, human insight remains indispensable. “Time is our most valuable asset,” Mello said. “If we can automate the admin work, then we can really focus on the bigger tasks—understanding what the client does, understanding the business.”
