Canadian Occupational Projection System (COPS)
Finance, Insurance, Real Estate and Leasing Services
(NAICS 5211-5269; 5311-5331)
This industry comprises establishments primarily engaged in financial transactions or in facilitating financial transactions (such as banks, insurance carriers and brokerage agencies) and establishments primarily engaged in selling and buying real estate for others or renting and leasing various tangible or intangible assets. Real estate and leasing services are the most important segments in terms of production, accounting for 66% of the industry’s real GDP in 2018, while finance and insurance are the most important segments in terms of employment, accounting for 71% of all workers. More precisely, the industry employed 1.2 million workers in 2018, with 49% in finance and banking, 22% in insurance, 24% in real estate and 5% in leasing. Employment is largely concentrated in Ontario (48%), Quebec (20%) and British Columbia (13%), with women accounting for a slight majority of the workforce (54%). The real estate segment is also characterized by a high proportion of self-employed (45%). Key occupations (4-digit NOC) include:
- Other financial officers (1114)
- Real estate agents and salespersons (6232)
- Customer services representatives - financial institutions (6551)
- Insurance agents and brokers (6231)
- Banking, credit and other investment managers (0122)
- Financial sales representatives (6235)
- Financial and investment analysts (1112)
- Accommodation service managers (0632)
- Insurance adjusters and claims examiners (1312)
- Property administrators (1224)
- Banking, insurance and other financial clerks (1434)
- Insurance, real estate and financial brokerage managers (0121)
- Financial auditors and accountants (1111)
- Information systems analysts and consultants (2171)
- Supervisors, finance and insurance office workers (1212)
- Securities agents, investment dealers and brokers (1113)
- Computer programmers and interactive media developers (2174)
- Insurance underwriters (1313)
- User support technicians (2282)
- Computer and information systems managers (0213)
- Assessors, valuators and appraisers (1314)
- Data entry clerks (1422)
- Financial managers (0111)
- Database analysts and data administrators (2172)
- Business development officers and marketing researchers and consultants (4163)
- Computer network technicians (2281)
- Economists and economic policy researchers and analysts (4162)
- Software engineers and designers (2173)
- Collectors (1435)
- Mathematicians, statisticians and actuaries (2161)
Although firms in the finance and insurance segments derive about one third of their revenues from outside Canada, the industry as a whole is heavily reliant on the performance of the domestic economy, given the importance of the real estate segment in terms of output. Overall, the industry is particularly sensitive to consumer spending and business investment, including residential and non-residential investment. Output and employment in the industry increased steadily from 2009 to 2018, even during the recession of 2008-2009, reflecting the fact that banking, insurance and other financial services are often essential services needed by both households and businesses regardless of the fluctuations in economic conditions. The substantial rebound recorded in equity markets following the financial crisis has given a boost to the finance and banking segment, while mortgage rates at all-time lows have stimulated growth in the real estate segment, with buyers purchasing homes at record high prices because of low financing costs. However, with the Bank of Canada increasing the interest rates three times in 2018, several housing markets across the country have begun to cool. Stricter mortgage regulations and taxes on foreign ownership to refrain housing speculation have dampened real estate activity in key markets like Toronto and Vancouver. Despite this recent slowdown, the resulting pace of growth in the industry’s real GDP averaged 2.8% annually over the entire period 2009-2018, posting among the strongest growth rates across the economy. Employment growth, however, was significantly lower, averaging 1.0% per year. This situation reflected significant gains in productivity, largely attributable to the growing use of online technologies in financial, banking and real estate services, allowing the industry to increase output with modest growth in employment. For example, premium calculations, sales and claim processing are being increasingly automated by insurance firms. The rise of fintech start-up companies is also playing an important role in encouraging Canada’s largest banks to adopt more innovative technologies.
Output growth in the industry is projected to soften over the period 2019-2028, largely reflecting a less upbeat housing market. Slower growth in final domestic demand, particularly in residential investment and consumer spending, will not only restrain the demand for real estate and lending services, but also the demand for home and property insurance services. While mortgage rates remain low, several factors are expected to limit investment in new housing, including stricter mortgage rules, high household debt, and the gradual decline anticipated in household formation. Renovation spending and ownership transfer costs are also projected to grow at a slower pace, partly due to a softer resale market (in 2018, Canadian home resale prices fell for the first time in a decade). At the same time, the weaker pace of growth anticipated in disposable income in Canada (resulting from slower growth in the working-age population and massive retirements of baby-boomers) is expected to restrain consumer spending, particularly for the purchases of big-ticket items such as cars and household appliances. This situation could be worsened by the high levels of household debt and any potential increases in interest or mortgate rates over the longer term horizon (in response to inflationary pressures resulting from a tighter labour market).
On the positive side, the industry is expected to benefit from a new measure recently introduced by the federal government that will offer first-time homebuyers financing up to 10% of the cost of their home. Demand for business lending is also expected to be spurred by renewed growth in investment related to machinery and equipment and faster growth in the construction of commercial buildings, partly in response to low office vacancy rates in the Toronto and Vancouver areas and robust demand for warehouse space due to the growing adoption of e-commerce. Financial institutions are in the midst of a technological revolution, with fintech and insurtech applications transforming the traditional business models and opening doors to new competition, notably from the computer services industry. Such technologies include the use of artificial intelligence, big data analysis, robotic process automation (RPA), open banking and blockchain transactions to improve efficiency in the delivery of financial and insurance services. For example, fintech is making financial services easier to use through mobile banking and automated advisory services, while insurtech calculates discount premiums by monitoring healthy behaviours through tracking devices or biometric sensors. However, the steady rise in the number of data breaches presents a risk for financial institutions and regulators must ensure those new applications are safe for consumers and firms before being fully implemented. The frequency and cost of natural disasters are also rising, threatening the stability and profitability of the insurance segment.
On average, real GDP in the industry is projected to increase by 2.2% annually over the period 2019-2028, down from 2.8% in the previous decade. Employment growth is also projected to slow somewhat, averaging 0.8% per year. Again, most of the growth in output is expected to be fuelled by productivity gains resulting from technological innovations. The increased prevalence of automation and online services in real estate, banking, insurance, and even investment services will continue to improve efficiency in the industry. However, productivity growth may not always come at the expense of employment growth. It is mostly the composition of jobs within the industry that is expected to change over the coming years. For example, the automation of repetitive tasks should reduce demand for less skilled workers such as bank tellers and customer service representatives. Demand for financial advisors could also be impacted, as new digital tools and platforms are automating a growing number of activities traditionally performed by portfolio management firms. In order to keep up with emerging fintech and insurtech startup companies, the industry is expected to hire a larger number of workers with specialized skills in information technology (IT), such as software engineers, data scientists and cyber security experts, which could more than compensate for the jobs that may be displaced. While fintech and insurtech firms can sell their innovative applications to financial institutions, many of them are supplying services directly to consumers and businesses, thereby competing directly with existing banks and traditional insurance companies.
Real GDP and Employment Growth Rates in Finance, Insurance, Real Estate and Leasing Services
Sources: Statistics Canada (historical) and ESDC 2019 COPS industrial projections.
Sources: Statistics Canada (historical) and ESDC 2019 COPS industrial projections.