The Canadian market for technology insurance is showing clear signs of softening. Demand for coverage continues to grow as more businesses develop and distribute technology products and services, but competition among insurers has kept pricing low.
According to Marianne McKinnon (pictured), underwriting manager, technology, cyber and errors & omissions at Victor Canada, this imbalance is apparent, but it will not last forever.
Technology insurance is distinct from general cyber coverage purchased by various professionals in the services industry, she told Insurance Business. The policies designed for technology firms combine liability protection with cyber coverage, reflecting the risks faced by companies that build, sell, and service digital products.
“Technology liability is a bit of a niche product – specifically intended for technology insurance – which means companies that are distributing and selling technology services and products to the public,” McKinnon said.
She added that “that specific policy is not the same cyber policy that an accountant or an engineer would purchase.” The technology clients, she said, are purchasing a hybrid policy that couples technology, and other cyber-related coverages.
This hybrid model has become the industry standard, though Victor also continues to offer standalone cyber policies, she said. The flexibility, she says, reflects the diversity of risks faced by technology firms, which often provide both professional services and digital infrastructure to customers.
McKinnon sees conditions for technology liability coverage easing, as more insurers target the sector.
She pointed out that the segment focused on technology professionals has experienced significant softening. As the industry continues to expand, more insurers are recognizing the opportunity and introducing products tailored to this market, which has added competitive pressure and pushed rates lower.
In her view, this softening is not just a temporary blip, and there are signs that the lean conditions are going to prevail for a while longer. However, there are some early signs that the tide is turning.
“Over the next few months, we expect that there ought to be a bit of a pendulum swing that's going to happen,” she said.
Claims activity, McKinnon noted, is already starting to put pressure on the sustainability of today’s soft market – and it’s only a matter of time before everyone operating in the space feels the impact. As losses accumulate, rates will eventually need to rise, leading to a harder market – though she emphasized that shift is unlikely to happen right away.
“The pricing is going to have to catch up, and that will create a bit of a hardening, just not in the immediate future,” she said.
While discussing technology liability trends, McKinnon also pointed to challenges in the adjacent cyber insurance space, where pricing pressures and competitive dynamics are creating a different set of issues. She explained that established carriers have built robust, sophisticated cyber products that cover a wide range of exposures. But these policies are increasingly being drawn on as claims grow in both number and cost, particularly in areas such as cybercrime, fraudulent payment transfers, and notification expenses.
“To stay ahead of the curve, we have to take the steps necessary to price those coverages accordingly, because we know that they’re going to be a target for claims,” McKinnon said. For long-standing players, the challenge is to strike a balance between keeping products competitive and ensuring premiums reflect claims history and loss data.
That balance is complicated by new and emerging insurers trying to capture cyber market share. Some are underpricing policies or paring back coverage in order to win business, which McKinnon warned may leave clients with gaps in protection. While cheaper options may look attractive, they may not provide the same level of protection as established offerings.
This creates a communications challenge for brokers, who must explain the differences between products and help clients secure “a robust cyber program” that can withstand today’s threat environment.
McKinnon emphasized that her perspective reflects the experience of underwriters, brokers, and the market at large, and not actuarial models, but the takeaway message for the broader industry can be seen as twofold: today’s conditions create opportunities for brokers and their clients to secure coverage at competitive terms, but they should prepare for a gradual shift.
Technology firms may see stable pricing in the short term, but, as more claims accumulate, the market will inevitably correct. While capacity and competition have softened pricing today, a harder market is on the horizon as loss experience mounts. For technology companies, that means locking in favorable coverage now could prove advantageous when rates eventually climb.
