October 22, 2020 by Greg Meckbach
One lesson from the economic disruption from COVID-19 is the importance of telling clients exactly what risks are and are not covered, an Insurance Brokers Association of Ontario panelist suggested Thursday.
“Business interruption class action litigation does not attract capital into our country,” Carol Jardine, president of Wawanesa Mutual Insurance Company’s Canadian property and casualty operations, said during a CEO panel discussion at the IBAO annual convention Thursday. “Reinsurers are hesitant now to support us, to grow our commercial business, because they do not know what is going to happen with business interruption litigation — and some of that is people not understanding what the coverage is.”
Jardine was alluding to several breach-of-contract lawsuits filed since April against insurers who denied business interruption claims from companies whose operations were shut down or severely curtailed due to COVID-19. The allegations in these lawsuits have not been proven in court. For class action lawsuits, a court must first certify a class before there is any trial on the facts.
“Brokers and insurers, we have to come together and be extremely more forthcoming in explaining what insurance does and does not do, and do it as early as possible,” Jardine told a primarily broker audience during the CEO panel, which the IBAO holds each October during its annual convention. “We have tended to be a little shy and we have to be a lot more aggressive as these kinds of events come to fruition.”
Also on the panel was Travelers Canada CEO Heather Masterson, Intact Canadian operations president Louis Gagnon, and Economical Insurance CEO Rowan Saunders.
Moderator and IBAO CEO Colin Simpson asked Saunders about the state of the economy and commercial lines.
“If you go back to the pre-COVID environment, the commercial marketplace was challenged,” Saunders replied. “We had years of underpricing and there were increasing NatCat [natural catastrophe] events. We were starting to see the impact of these lower interest rates, and it stressed some problem segments. And then COVID comes in with another whole set of challenges.”
Separately, commercial insurers and MGAs have told Canadian Underwriter that coverage for restaurants, hotels, and event venues has become more difficult to place.
“Why is hospitality not a favoured class right now?” Jardine asked rhetorically during the CEO panel. “It is because the government is out there, to be quite honest, saying people are catching the virus in these locations. That opens these locations up to liability, and we have to be worried about what the impact might be on their business.”
As a result of the current state of the commercial insurance marketplace, brokers today should consider doing a couple of things, Jardine recommended. “Number 1: Think long and hard about the partners you are choosing for insurers, and make sure that they are going to be there for you through thick and thin. Number 2: You are the risk managers for your customers. You understand risk transfer, you understand risk management, and you have to help your customers understand what they can do to reduce their insurance costs and make them a risk that people want to underwrite.”
Between 5% and 7% of Canadian small businesses could disappear following a second wave of COVID-19, said Gagnon.
“When you think about that, that will have a big impact on job creation, on the stability of the economy, and the speed at which the economy could re-start after [the COVID pandemic],” said Gagnon. “We cannot save the world. We can for sure help the small businesses that maybe would have a chance to survive after the pandemic. I think that is the position we have to take. It is very complex do to.”
Feature image via iStock.com/stellalevi