Personal property insurance regulation not inevitable, but possible in foreseeable future: former FSCO CEO

NICC MONTREAL – Canadian insurers could be hit with regulations in personal property pricing and underwriting, so the industry needs to do an even better job of explaining property risk to consumers, speakers suggested Thursday at the National Insurance Conference of Canada.

“Ultimately the big losers are going to be the consumers, if the product gets regulated, over the longer term,” said Philip Howell, former chief executive officer of the Financial Services Commission of Ontario.

He made his comments Thursday during a panel discussion – titled Is Property at Risk of Becoming the New Auto – at NICC, held at the Sheraton Centre in downtown Montreal.

Also on the panel was Karen Gavan, president and chief executive officer of Economical Insurance.

If personal property insurance were to be regulated “this can’t be good for consumers because regulated products tend not to keep up with innovations on a timely basis,” Gavan said.

The panel was moderated by Tim Bzowey, head of home and auto for RBC Insurance, owned by the Royal Bank of Canada. Bzowey alluded to catastrophes during 2013, including floods in Calgary and southern Alberta in June, floods in the Toronto area after a record rain storm July 8 and an ice storm shortly before Christmas of 2013.

“Calls for regulation of property insurance to protect consumers from increases in premiums, coverage changes and denied claims, kind of threatened to boil over in the wake of 2013 summer floods in Alberta and Ontario and we followed that up in the [greater Toronto area) with an ice storm,” Bzowey said. “Admittedly, the rhetoric has diminished over the last year, probably because we haven’t had major severe weather impacts in large urban areas recently, but does that really mean the threat has abated, or are we just one event from picking up where we left off?

He asked Howell what the “prospects” are for regulation in personal property insurance pricing and underwriting.

“I think the prospect of imminent regulation in personal property is not there,” Howell replied. “Is there a possibility? Absolutely. Is it possible in the foreseeable future? I think for sure, and moreover, it’s much more probable than would have been the case 10 or 20 years ago. Is it inevitable? I think the answer to that is no.”

Insurance providers can do a better job of explaining risks to consumers, suggested Robyn Young, president of the Insurance Brokers Association of Alberta.

“We have to do more as brokers, agents and insurance professionals to ensure that our consumers are aware of what they can do to mitigate their risk,” Young said. “I think that the insurers can do a bit of a better job of that as well.”

Young suggested consumers do not necessarily choose which home to purchase based on risk.

“Our purchasing decision generally isn’t based on whether we are on a floodplain or close to a forest that burns every five years,” she said. “It’s more about where the schools are, what the municipal taxes are. They have no idea about the infrastructure that’s underneath their homes or what flood mapping there is or whether they are in a flood zone.”

Gavan also suggested consumer education is important.

“Government intervention is more likely to happen when there is an issue on availability and affordability,” Gavan said. “I don’t think there’s an issue of availability in the Canadian marketplace, although the cost, as we have become more and more sophisticated in our underwriting, and our analytics — those who are exposed to more risk will pay more, and I think we have to really up the game in terms of the consumers understanding what risks they are exposed to and how they can mitigate them.”

Produced by MSA Research Inc., NICC continues until Friday.