The Top Broker Guide to Regional P&C Issues
Floods in the West, shrinking markets in the East and succession planning everywhere in between
Ronan O'Beirne on September 26, 2014
It’s shaping up to be a challenging year for insurance brokers in Canada. We spoke to brokers and broker associations across the country to find out what issues they’re dealing with. What we found was a mix of perennial and new; regional and national; expected and surprising. One thing that was consistent was the difficulty. Even provinces that have found solutions (and not all have) are not out of the woods of their particular challenges just yet. Perhaps a look at what brokers and brokerages in other parts of the country grapple with can help others find ways out of their jams.
As Kim Neale of Burns & Wilcox wrote in our April issue, the burgeoning sector of consultants and contractors in forestry presents a big opportunity for brokers on the West Coast.
“A good insurance provider will provide risk management solutions to help contractors and consultants navigate through licensing and registration requirements and provide customized solutions that fit,” Neale wrote. “A truly best-in-class combined package will provide natural resources damage and fines and penalties coverage.”
For more on opportunities in the forestry sector, see our report.
And then there’s always the constant fear that the ground may fall out from under your feet. An Insurance Bureau of Canada report last year warned that a 9.0-magnitude earthquake off Vancouver could lead to $20 billion in insured losses.
Water, water everywhere… and still no plan in place. One year after the devastating floods in the south, flooding will probably stay top of mind for brokers for at least another year.
“I think we know what the problems are, and it’s a matter of addressing them,” says George Hodgson of the Insurance Brokers Association of Alberta. “At the end of the day, everybody understands that it’s going to have to be a partnership between all levels of government and the industry and homebuilders.”
Hodgson adds that absent a province- or country-wide flood prevention strategy, brokers should emphasize to clients that they should take small steps to mitigate their own flooding risks, such as installing sewer backup valves.
He says last year’s losses also brought home the reality that insurance companies cannot afford to subsidize property insurance with other products forever. With brokers on the frontlines, he says, they need to “make sure that the product is available and affordable and sustainable.”
With SGI dominating the province’s insurance market, brokers in Saskatchewan say they need to maintain open lines of communication with the Crown Corporation.
“We don’t know how [SGI] thinks and some decisions they’ve been making have been interpreted by some members as attempting to bypass the broker channel,” says Jim Seip, president of the Insurance Brokers’ Association of Saskatchewan. “They’ve been good to us over the years, but we need that two-way line of communication to stay open. I don’t want a fire hose coming towards us and a garden hose going back.”
Longtime broker Phil Casey adds that some brokers are flummoxed by ratings generated by rate-by-peril online portals.
“One time, you could have 10 people in a row and they all have the same type of house and they’re all rated the same,” says Casey. “Now those 10 people could be rated differently based on a bunch of different things and we don’t know, as brokers, what the criteria are.”
Seip says that rate-by-peril “may be a necessity in order to keep premiums to continue to be affordable to the average person,” but that brokers would like to see more transparency in how the ratings are generated.”
Following last month’s re-election of Kathleen Wynne’s Liberals, the Insurance Brokers Association of Ontario has encouraged the government to revisit insurance-fraud legislation that died on the order paper in May.
Bill 171 would have brought in tough regulations for the towing industry and stemmed fraud in auto insurance, in addition to fixing the dispute resolution system, which suffers from an intense backlog. These measures would have helped the government achieve its goal of a 15 percent reduction in premiums.
Carroll’s support for Bill 171 was echoed by Don Forgeron of the Insurance Bureau of Canada, who praised the bill in a recent speech to the Economic Club of Canada. Forgeron also called for more “balance” in the industry to ensure that any lowering of premiums in auto insurance is matched by affordable products.
With more companies hiring full-time officers to manage and mitigate risk, brokers need to place less emphasis on their traditional role, according to Gilles Gervais, vice-president, team leader of BFL’s Montreal office.
“We become more advisor than broker,” says Gervais. “We must step away from the old way of doing things, the old insurance broker’s roles that we all know.” He says this shift toward risk managers has come as companies become more aware of emerging risks, like cyber threats. “Ten years ago, we were not talking about cyber risks,” but it is no longer a niche concern—it affects everyone. “We all face this risk, but customers like banks are more exposed because of the information they have. What is it worth, the information you collect?”
Brokers need to be able to help customers answer these questions and develop products that protect them from risks that remain nebulous to many.
Newfoundland & Labrador
Here, the issue is the Incredible Shrinking Market for Consumers. Economical announced earlier this year that it would pull out of the province in the fall, shortly after Intact announced its acquisition of Metro General Insurance, which has been in the province for more than 40 years. These moves follow Travelers’ acquisition of The Dominion late last year.
“The choice that the consumer has is certainly shrinking,” says CJ Nolan, president of the Insurance Brokers Association of Newfoundland and Labrador. “We’re just concerned that if another market pulls out, it puts us in an even more precarious situation.”
Nolan adds that IBAN has brought the brokers’ concerns to the government, and is asking the province to look at the cap model in other Atlantic provinces and consider whether it works better than Newfoundland and Labrador’s deductible model. “We’re not going to tell government what we think is better, but at the end of the day, all the other Atlantic provinces, especially Nova Scotia and New Brunswick, are attracting new carriers, and we’re not.”
Copyright 2014 Rogers Publishing Ltd. This article first appeared in the July 2014 edition of Canadian Insurance Top Broker magazine