On January 19, 2023, an article on the Insurance Portal highlighted the benefits of credit insurance products listed by the competitive watch center InsuranceINTEL, particularly in a high-interest rate environment. 

This article could almost be a direct copy from that one, as interest rates remain high. They have even risen from 4.25% in December 2022 to 5.00% in July 2023, where they have stayed since. The Bank of Canada will announce on January 24, 2023, the direction of the benchmark rate and will publish its Monetary Policy Report. 

Meanwhile, inflation has significantly retreated to 3.1% in November 2023, compared to 6.3% in December 2022, as reported in last year’s article. 

Here to stay 

It’s not hard to see a world where interest rates are persistently higher than what people have grown used to - Carolyn Rogers 

According to Carolyn Rogers, Senior Deputy Governor of the Bank of Canada, it's something people will have to get used to.

"All this obviously involves a lot of uncertainty. But it’s not hard to see a world where interest rates are persistently higher than what people have grown used to," said Rogers during a speech at an event organized by Advocis Vancouver, on November 9, 2023. 

Rogers explains why. "Interest rates were unusually low for an extended period, from the 2008–09 global financial crisis until early 2022," she said. She further noted that "major global forces that were pushing down longer-term interest rates may have peaked and could start reversing." 

"These forces include the rise in savings as baby boomers prepared for retirement and the inclusion of China and other high-saving countries in the global economy," Rogers observed. 

She also mentioned that "ongoing wars in Ukraine and in Israel and Gaza could worsen or spread, which might push up energy prices and translate into higher inflation." 

The upside of high rates 

This phenomenon is not limited to Canada. "Elevated interest rates will become the new norm for many economies globally," believes Joe Davis, Global Chief Economist and Global Head of Investment Strategy Group at Vanguard, a company specializing in exchange-traded funds (ETFs). 

According to Vanguard's report, high rates also have advantages. "For consumers and businesses, higher interest rates force prudence in borrowing decisions, increase the cost of capital, and encourage saving," the report states. 

A shrinking market 

In such an environment, the peace of mind offered by credit insurance becomes crucial, especially as consumers have had to take on debt or renew mortgages at rates not seen since the 2008-2009 global 

financial crisis. Defaults are on the rise, and more than half of young adults feel anxious about their debt. 

The market has shrunk since last year. On June 1, 2023, Blue Cross (Quebec Blue Cross and Ontario Blue Cross) stopped selling its Mortgage Plan credit insurance product. Following its merger, Beneva retained only one product, Tempo Plus from SSQ Assurance, leading to the discontinuation of La Capitale's Credit Insurance. 

However, the offering remains diverse. Five insurers together offer eight products. Humania Assurance stands out with three products, and iA Financial Group offers two. All insurers cover loans linked to a residence or multi-unit building, a home equity line of credit, and the purchase or lease of a vehicle. Coverage for other loans varies from product to product. 

Nearly 3 billion dollars 

According to Statistics Canada's The Daily bulletin published on December 19, 2023, total credit liabilities of households reached $2,896.4 billion in October. This total includes mortgage debts, home equity lines of credit, credit card debt with chartered banks, and non-mortgage debt categories. 

Encouragingly, Canadian household debt has been consistently decreasing since 2022. Data published in The Daily shows that the growth rate of household mortgage debts peaked at 10.4% in May 2022, compared to May 2021, and has been steadily decreasing since. According to the latest data from Statistics Canada, the growth rate of these loans was 3.4% in October 2023, compared to October 2022. 

Growth in non-mortgage debts has also slowed since mid-2022. In October 2023, these debts grew by 2.2% compared to October 2022. This growth had peaked at 4.4% in October 2022, compared to October 2021.