Briefing Note: Alberta

Before COVID-19 hit Canada in March, George Hodgson, CEO of the Insurance Brokers Association of Alberta, says “a good chunk of habitational personal property was probably doing okay.”

At least, outside of the condo market.

Brokers are struggling to place condo policies, and if they are finding coverage, “the premiums are much, much higher than they were before,” says Hodgson. “It’s creating a lot of angst in the system overall. Commercial is in a significant hard market here.”

Another factor in the condo crisis was severe underpricing by one insurer that recently pulled out of the class, Hodgson said. “They were charging anywhere from $0.04 to $0.08 per square foot, and they should have been charging $0.15 to $0.25.”

While this situation may have made it easier to find condo insurance just a year ago, getting condo owners’ units repaired was another story. Claims costs were on the rise for various reasons, creating a crisis in the condo market.

There was some good news for the auto insurance market in 2019. The 5% auto rate hike cap was removed in September 2019, making it easier to place auto policies. “Prior to the cap being removed, carriers were spending $112 for every $100 that they took in premiums,” Hodgson said. Absent the cap, most insurers raised rates by at least 12%, thus increasing capacity.

How will COVID-19 affect the industry? “Brokers are going to find themselves in a cash crunch,” Hodgson predicts, “because they have to keep their staff on to serve their clients. But their clients might be fewer and the premiums might be less, and therefore the commissions will be a lot less.”