Understanding the Insurance Industry Classifications
The insurance industry in Toronto can be categorized using a system called the North American Industry Classification System (NAICS)ii, which helps organize different economic activities into a clear structure. Think of it as a way to sort businesses into different family trees. Starting with a broad section labeled “Insurance Carriers and related activities”, which is a sub-sector of the sector “Finance and Insurance” the NAICS narrows down to more specific categories. Insurance Carriers and Related Activities covers all the companies involved in insurance, from those that issue policies to the ones that help manage them, like Agencies and Brokerages.
Figure 1 uses a flowchart to show how these parts fit together, making it easier to see how the insurance industry is structured by Statistics Canada’s North American Industry Classification Systemiii.
This report will highlight the two key segments of the insurance industry. These are:
Insurance Carriers: Insurance carriers create the insurance products (think of them as the ‘manufacturers’). They are also known as the insurance company or the insurer and sell their products through Agents, Brokers or directly to consumers or both. This segment focuses on establishments that undertake the underwriting of life, health, and property/casualty insurance policies and those involved in reinsurance. These entities manage risk by pooling and investing premiums to cover future claims.
The rise of the internet and digitization has fundamentally changed how insurance is bought and sold, enabling Insurance Carriers to bypass traditional Brokers and go directly to consumers. Online platforms, comparison tools, and AI-driven underwriting have made it easier for consumers to research, purchase, and manage policies without needing an intermediary.
Agencies, Brokerages, and Other Insurance Related Activities: This segment comprises establishments primarily engaged in acting as Agents or Brokers in selling insurance policies and offering services that facilitate the insurance process.
Many Brokerages in Toronto still maintain brick-and-mortar retail locations, with storefronts found across the city, but their presence has significantly declined from a time when they were a fixture in nearly every neighborhood. Once the dominant way to purchase insurance, these offices have dwindled as digital platforms and direct-to-consumer models have reshaped the industry, reducing the reliance on in-person transactions.
These two segments of the insurance industry are fundamental to understanding the dynamics of the insurance market in Toronto. This selective focus allows for a detailed exploration of the core functions that define the insurance industry’s contributions to Toronto’s economy.
ii The North American Industry Classification System (NAICS) follows a hierarchical structure with five levels, helping categorize businesses based on their economic activities. It starts broadly with sectors (two-digit codes), then narrows down through subsectors (three-digit codes), industry groups (four-digit codes), industries (five-digit codes), and finally, Canadian industries (six-digit codes). For example, in insurance, we begin with 52 – Finance and Insurance (Sector), then 524 – Insurance Carriers and Related Activities (Subsector), followed by more specific categories like 5241 – Insurance Carriers and 5242 – Agencies, Brokerages, and Other Insurance-Related Activities, each further specified into industries like ‘52411 – Direct life, health, and medical Insurance Carriers’ and ‘52421 – Insurance agencies and brokerages. This system allows for a structured way to analyze and compare industries at different levels of detail. In this paper, the term “insurance industry” is used broadly to encompass the entire sub sector 524 – Insurance Carriers and Related Activities.
iii Note that the NAICS are a statistical framework, organizing the economy into a hierarchical structure to facilitate data collection. However, the NAICS are an abstraction and may not always mirror how sectors are actually structured or how companies work.