Overland flood template preferred option over inconsistent offerings: Cook

It is encouraging that property and casualty insurance companies have started offering overland flood cover, but the goal should be to develop an industry-wide template, Philip Cook, CEO of Omega Insurance Holdings Inc., said Tuesday during Industry Trends & Predictions: 2016 in downtown Toronto.

Speaking at the annual event presented by the Insurance Institute of Canada, Cook suggested that having a template for overland flood for all insurers would promote greater consistency and inform individual companies, thereby allowing each to decide whether or not it made sense to offer the coverage.

Emphasizing that overland flood coverage is “sorely needed in Canada,” Cook said, nonetheless, he is “a little disappointed that we haven’t, as an industry, been able to come up with a consistent way of doing it.”

Companies now offering the coverage “are all doing it differently,” he told attendees, citing differences in protections, definitions and deductibles.

This may be “fine for diversity, but it means that some other insurers have to catch up,” Cook commented. Those other insurers may not have the benefit of research done elsewhere or the data required to make an informed decision about catastrophic exposure.

If a template was available to all insurers, “then insurers could just decide whether they offer it or didn’t offer it,” he said, adding that he still believes “that’s going to come at some point.”

But better than a template for flood – or any other individual peril – would be for Canada’s primary p&c industry to sell catastrophic coverage without defining it, Cook told attendees. “The reinsurance industry has no problem defining a cat without having to define the cause of the cat,” he noted.

“Quake was the flavour of the month a few years ago; some other thing will be the flavour of the month next month,” Cook argued. “If you were to be selling the coverage based on catastrophic exposure, without defining it, I think we would get a much broader base of premium because almost everyone in Canada is exposed to some sort of catastrophic exposure,” he said, citing hail, drought, flood or rain as examples.

To make that happen, a p&c company’s federal licence would need to include a new category of what it could write, Cook said in an interview with Canadian Underwriter. “There would have to be a category of catastrophic loss as a line of business. And then I think you’d see companies offering that catastrophic line of business, in addition to their regular coverages,” he explained.

If everyone was offered catastrophic cover, Cook expects that most people would buy, increasing the number of policyholders who are currently contributing to the pot.

“Everyone would have a different reason for buying it, but you’d put more money in the pot for companies by not calling it something specific,” he said in an interview with CU.

“It stands to reason that if you call it quake, only people in the quake zones will buy it; if you call it flood, only the people in the flood zones will buy it. And they will never cover the losses they have from those premiums – ever. You can’t charge enough,” Cook emphasized.

More coverage of Industry Trends & Predictions: 2016

Canada’s p&c industry projected to see underwriting profit for 2015; capital will follow opportunity: Cook