Small business owners are the backbone of Canada’s economy, and understanding their confidence levels can provide valuable insight into broader economic trends. That’s why I closely follow the Canadian Federation of Independent Business (CFIB) Business Barometer, a monthly index that tracks how small businesses feel about their future—a “confidence thermometer” measured on a scale of 0 to 100. Scores above 50 mean more businesses are optimistic than pessimistic.

For those of us in the insurance industry, this Barometer is particularly important. It helps us anticipate shifts in claims patterns, understand industry-specific challenges, and adapt to the evolving needs of our clients.

Understanding the implications of Barometer scores

Low scores

Periods of economic distress, such as the COVID-19 pandemic in 2020 (index: 36.3) or the 2008 financial crisis (index: 45), show how low scores mirror widespread uncertainty:

  • Increased business interruption claims, particularly in hospitality and retail.
  • Higher fraud risk as hardship leads some businesses to exaggerate or falsify claims.
  • Delays in claim settlements as a surge of claims slows processing.

High scores

Higher scores—like the pre-COVID peak of 70.6—reflect optimism and business growth, which presents its own challenges:

  • Property and liability claims rise as expanding businesses invest in new assets.
  • Risk of underinsurance as rapid expansion outpaces coverage.

Current trends and sector-specific insights

As of November 2024, the Business Barometer has risen to 59.7, signaling cautious optimism. Although below pre-pandemic highs, the recovery trajectory suggests improving confidence. Finance and insurance leads at 64.5, though 71% of businesses cite insurance costs as a major constraint; hospitality and retail sit at 51.7 and 56.1; construction trails at 49.8 amid supply-chain and labor pressures.

Hard and soft market cycles

Insurance is a significant operational constraint, cited by over 70% of Canadian SMEs. Hard markets—higher premiums, stricter underwriting, reduced capacity—often coincide with low Barometer scores. Soft markets—lower premiums, broader coverage—align with recovery and higher scores. The economic conditions the Barometer reflects directly influence the insurance landscape.

A time to prepare for growth

The November 2024 score of 59.7 is a significant rebound from the pandemic low of 36.3. As the Barometer climbs, Canada’s economic and insurance markets stand to benefit from eased cost pressures, increased coverage uptake, and renewed growth. Insurers and businesses alike should capitalize on this momentum with tailored solutions and proactive strategies.