Can the P&C industry navigate these 3 problems in 2023?

Thanks to supply chain disruptions, labour shortages and inflation, insurance policyholders face longer and more expensive repairs. To address that, insurance industry execs said, Canada’s P&C industry needs to up its communications game during the claims process.

P&C insurance professionals are sounding the alarm because myriad issues beyond the industry’s control are combining to wreak havoc on the claims experience across all lines of business, both personal (auto and home) and commercial.

“It is just a reflection of how the supply chain and the interaction between the different stakeholders in the industry are getting squeezed at very different levels,” Louis Gagnon, CEO of Intact Insurance’s Canadian operations, observed during a CEO panel at the most recent Insurance Brokers Association of Ontario convention. “I think [coming out of the pandemic, the industry] probably had to change some [claims] processes, making them simpler, reduce irritants, and create more collaboration between the broker, the body shops and the contractors.”

For insurers and brokers, the key is to focus on things within the P&C industry’s control, said Matthew Turack, group president of insurance at CAA Club Group. For example, insurers, brokers and industry supply chain partners must communicate with customers openly, honestly and transparently about the status of their insurance claims.

“I hear day in and day out from our brokers [to] communicate,” Turack told brokers at the IBAO convention. “Communicate in real time, be there to answer the phone when I call you. When I email, respond in a fairly rational, reasonable period of time.

“That open and transparent communication is where you build the trust [with consumers]. And that trust is huge — especially during these recessionary times. Owning and maintaining that trust, to me, is one of the most important things that we can deliver.”

Execs noted three key problems have created a perfect storm for claims management:

Labour shortages

In the auto repair and other sectors, a shortage of skilled labour is making it more difficult to meet consumer demand, Statistics Canada confirmed in October 2022.

“There were 11,645 job vacancies for automotive service technicians in the second quarter of 2022, more than double the 5,730 openings in the previous year,” StatsCan noted.

And wages ticked upwards in response, as auto repair centres paid higher wages to attract and retain service technicians. “Their average hourly wage also ticked up by over $2 during the same period [between 2022 Q1 and 2022 Q2] to $26.90, and to $28.60 for positions requiring at least a certificate or diploma,” StatsCan observed.

Also, construction labourers’ wages increased an average $1.43 per hour between June 2022 and October 2022, per StatsCan.

Supply chain disruptions

Goods shipping slowdowns mean car repairers must wait longer to obtain imported or ordered auto parts. And the average time of vehicle rental during a claim tells a story about the increased length of the repair cycle.

In Canada, the overall length of renting a car for claims involving repairable vehicles “was 16 days in 2022 Q2, an increase of 5.8 days from 2021 Q2 and an increase of almost a full day (+0.9) from 2022 Q1,” as noted by Mitchell, an Enlyte company that provides auto physical damage solutions.

Inflation

Economic disruptions mean the cost of car parts and materials for residential and commercial building are increasing, although some rates of increase are slowing down.

Statistics Canada figures showed the average monthly consumer price index for passenger vehicle parts, maintenance and repairs went up by 7.1% between October 2021 and October 2022.

In the building and construction sector, residential building construction costs rose 2.5% and non-residential building construction costs gained 2.1% in 2022 Q3. That’s slower than in 2022 Q2, when residential construction costs grew 5.3% and non-residential costs were up 4.0%.

“Additionally, higher material costs, amid a limited availability of materials and equipment, particularly concrete, steel, glass and piping, contributed to higher costs,” StatsCan observed in a November 2022 report.

 

This article is excerpted from one that appeared in the December-January 2022-’23 edition of Canadian Underwriter. Feature image courtesy of iStock.com/Group4 Studio