Inflation creates opportunities for brokers to revisit risks with clients

Recent inflation trends notwithstanding, data from the past few quarters indicate premiums are stabilizing as the P&C industry eases out of the hard market, said Celyeste Power, executive vice president, strategic initiatives and advocacy at the Insurance Bureau of Canada (IBC).

“A lot remains uncertain right now, with inflation, with supply chain disruptions, cyber, catastrophic weather events, etc.,” she told Canadian Underwriter. “I can’t say what it means for the future but what we have seen so far is certainly a stabilization of premium increases out of the hard market.

“It’s a competitive industry, which means that every insurer is going to look at each business in their own way.” She noted insureds may take advantage of that competition to shop rates.

Brokers and agents, meanwhile, are in a good position to get in front of clients about the emerging factors that may impact their risk.

“You want to verify that your commercial property insurance coverage reflects the correct valuation, given replacement costs may have increased due to inflation,” she said. “What we found through the hard market was risk mitigation and management is critical to ensuring a long-term, sustainable insurance scenario for any consumer.”

Higher-end building materials also will impact valuations for commercial properties, noted Bernard McNulty, chief agent at Allianz Global Corporate & Specialty.

Increased focus on meeting ESG (environmental, social and governance) targets is increasing demand and costs for environmentally sound building products and components, he told CU. Likewise, social responsibility expectations around where products are procured is increasing.

Proactive risk-mitigation efforts, like a restaurant owner who’d endured slip-and-fall claims replacing the stairs that led to those claims, are also valuable to insureds, IBC’s Power said.

She added those insureds sometimes neglect to inform insurers about any upgrades.

“If you make improvements – you put in new stairs, new sprinkler systems, new security cameras – make sure that your insurance representative is aware of that, and that it’s clearly articulated to both your broker, your agent and the underwriter,” said Power.

Alongside price inflation, McNulty said factors driving social inflation continue apace. He cited litigation funding, higher jury awards and increasingly aggressive plaintiff firms as primary contributors to the trend.

“I do believe both of these forms of inflation we’re experiencing will prolong the existing hard market in Canada,” he said.

“To cover rising claim costs, insurers must ensure adequate premium is charged. In the short term, the increase in interest rates is exacerbating inflationary factors, but it will have a cooling effect in the next few months.”

 

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