You know why the market is hardening – but do your clients?
August 26, 2019 by Adam Malik
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Thanks to premium increases, a byproduct of a hardening insurance cycle, insurance professionals are facing an uphill battle in the eye of public opinion. That’s why Justin Thouin, co-founder and CEO at LowestRates.ca, wants to change how the general public thinks of insurance, and to push the industry to work together to bring rates down.
“The story isn’t out there in terms of why these prices are going up,” Thouin told Canadian Underwriter. “People within the industry know why prices are going up – loss ratios are high, insurance companies aren’t covering their costs and, in many cases, and a lot of them are pulling out. But the average Canadian doesn’t know that. The average Canadian doesn’t even care about that. All they see is their car insurance price is going up. I feel the insurance companies need to push harder and work more closely with governments to make changes.
“I think there’s a lot that can be done, which is the exciting thing, and I think it needs to be done,” Thouin added.
Based on the quotes that his site provides to consumers, Thouin says, “we’re seeing increases year-over-year, quarter-over-quarter in Ontario, Alberta and the Atlantic provinces – all in double digits, all between 10-20%. It’s quite significant.”
That, in turn, causes consumers to think they’re being ripped off by insurance companies. People need auto insurance to drive, so the perception is they’re being held hostage by paying whatever carriers demand. “It’s a situation where Canadian consumers are paying more for car insurance and they all think, ‘These insurance companies are just gouging us. They must be making money hand over fist,’” Thouin said.
Of course, that’s not true. But consumers don’t know that, he added. “The insurance system is not great right now. You have consumers who are not happy about prices going up, and you have insurance companies not happy because they’re not making enough money.”
He wants to get a message out that he hopes the industry echoes: “The reality is, it’s not a good time for insurance companies either. They’re losing money because they’re paying more out in claims than they’re generating in premiums. So a lot of them are pulling out of the market. Prices are going up on our site because fewer insurance companies are putting themselves out there for consumers. Less competition and less availability mean higher prices.”
But understanding there’s an issue doesn’t exactly stop the problems. “We have to look at why the prices are going up, why claims are up and why insurance companies have to pay so much out. What can be addressed?”
And this needs to be communicated to consumers if the industry wants to overcome its image problem, Thouin believes.
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Naming your company lowest rates and pushing the narrative all these years that the public is paying too much is the bigger problem. How about focusing on coverage and service instead of price all the time. Then the public would understand more why rates are where they are and not be focused on the cost of insurance.
The industry has done a poor job of informing clients of market conditions. There are very few press articles and literature that explains the reasons for the increase in rates and stricter underwriting. As brokers we have regular conversations with clients where we have to explain to them the state of the industry. Most of the press coverage has only focused on rate increases or issues in specific territories.
The public gets bombarded with adds from all sides about how they can save money if they switch to another provider. There is never any mention of what coverages they might require. only that they CAN save implying that they are already paying too much where they have their current coverage. This has been imbedded in the public’s brain even before these adds started appearing so it only strengthen the message of what they already think. In a hard market , this only entices your insureds to call the competition. Similar to investments, the cycle (and I have seen a few over the years) tends to stabilize itself after a few years of instability. You don’t move all of your investments from your financial advisor in a knee jerk reaction because there is a fluctuation in your investments so why would you move all of your insurance portfolio for the same reasons? This can become a full time job for your insureds much like following the TSE. I have to agree with Jay B that the industry as a whole could do a better job of informing the public of the state of the insurance industry when times get tough to alleviate some of the load for the broker channel and to inspire confidence in the public that the insurance industry is still financially sound and will bounce back from this harder period.