How to bring the risk of catastrophic events home to your clients

Canada’s property and casualty insurance industry needs to ramp up its public education efforts to bring the risk of catastrophic events home to the Canadian population, speakers said Thursday during the virtual CIP Society Symposium 2021.

“I don’t like to talk about 1-in-100-year events that our industry has historically spoken about,” said Carol Jardine, president of Wawanesa Mutual Insurance Company’s Canadian P&C operations. “I like to take those down into people’s reality, which is that if you are living in an area [at risk of] a 1-in-100-year event, you’re actually living somewhere where the chance is that it’s going to occur in the next 25 years.”

Most people think of a mortgage in 25-year terms, Jardine observed during the symposium’s leadership panel session. “So, if I tell you there’s a good chance your home will be destroyed by a catastrophic event probably driven by climate change [over] the next 25 years, would you add that extra $10 worth of strapping? Would you put in a backwater valve in your home? All of these things will reduce the impact of severe weather or an earthquake to your home.”

Canada’s fourth-costliest catastrophe, the June 2020 hailstorm in Calgary — which cost the industry CAN$1.2 billion — was hardly a surprise, Jardine said.

“We knew there was going to be hail dropped in Calgary,” she said. “How do we make sure that the people who live in that area are aware that this was not a 1-in-your-lifetime event? This is going to happen again and you have bought a home in, and you live in, an area in hail alley.

“We’ve got people across the country who live in areas that are subjected to higher risk than others. How do we start that communication? I’m hoping the pandemic has shown people that things you think can never happen do — and will — happen to you and your neighbours.”

Some change is already occurring. For example, the industry is currently working to get gas shut-off valves put into homes in Vancouver, Jardine noted. The Institute for Catastrophic Loss Reduction recommended in its Fire following earthquake in the Vancouver region report in November 2020 the inclusion of seismic shut-off valves in all gas meters in at-risk areas.

“It’s about… creating a venue where the knowledge and awareness that we already have of the risks that are facing Canadians gets spoken about,” Jardine said. She noted there is a pretty strong uptake of earthquake insurance among British Columbians in earthquake zones in the province. “That’s not true in Quebec. However, we know that the risk of earthquake in Quebec is just as high.”

Building trust with consumers is part of the equation too, said Brian Parsons, head of the Canadian region of Willis Towers Watson. “Nothing tests trust more than when bad news is delivered and [it’s] easily worse that what they had hoped for or could have hoped for.”

Parsons said the industry needs to be more transparent about pricing, not only in a hard market but also during soft market conditions. “We’re just as guilty in a soft market,” he said. “We’re just happy to get reductions and the client is happy to take them, but we don’t really explain why the pricing is going down.”

During a hard market, explaining the rationale for rate increases calls for collaboration between insurers and brokers. “When the pricing goes up, I think as an industry we have work to do to explain why the pricing goes up so you can gain trust,” Parsons said. “I’ve seen clients have more trust with our brokers after being delivered a 200% increase on a multi-million dollar program because it was done the right way — transparently, [with] lots of communication, [and where] insurers were brought into the conversation and allowed to explain their position.

“No one likes bad news, but it doesn’t necessarily erode trust.”

Sometimes tough conversations with consumers and having them “drink the Buckley’s” is necessary, said Philomena Comerford, president and CEO of Hargraft Schofield LP and Baird MacGregor Insurance Brokers. “We were out telling them you have to do this or you’re going to become uninsurable. We’re actually kind of strict.”

Monica Ningen, president and CEO of Swiss Re Canada & English Caribbean, agreed sometimes it’s necessary to be “pretty forward in terms of what [consumers] have to do to make sure they are an insurable business long-term.

“One of the things we can do as an industry is really focus…on simplified products so that consumers can easily understand what they are covered for and what they are not covered for,” Ningen said. “On the consumer side, we have a lot to do. I think education and simplified products that consumers understand is probably one that’s close to the top.”

 

Feature image: Residents begin cleaning up in Calgary, Alta., Sunday, June 14, 2020, after a major hail storm damaged homes and flooded streets on Saturday.THE CANADIAN PRESS/Jeff McIntosh.