Canadian Underwriter

#Policy pressure

January 16, 2017   by Terri Goveia

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During the Fort McMurray wildfire, insurance company claims staffers dealt with the onslaught of coverage questions at mobile sites, by phone and through email. They also paid careful attention to another front line: feedback and questions from policyholders on Facebook and Twitter.

Insurers were prepared for online reactions— a glance at any social media platform reveals a disgruntled insurance consumer—and they’d seen a spike in public pushback during the 2013 Alberta floods. In a disaster, such messages are amplified a thousand-fold, says Paul MacDonald, senior vice-president of claims at RSA Canada. “We’ve always had individuals go to the media and create a stir, but when you have [large]-scale events like High River or Fort McMurray, you have a very significant social media response.”

As natural catastrophes continue to plague Canadian communities, online pressure isn’t a one-off scenario anymore, he says. And neither is the impact on insurers, as consumers push the boundaries for coverage and service. If disasters and social media backlash are now the norm, what new benchmarks have they created for policies or claims decisions? And at what cost?

Policies Under Pressure?

In 2013, much of the social media outcry came from policyholders seeking coverage parity with their neighbours—why was one home covered for flooding and not the other, for example? Although many insurers responded by covering losses not included in policy wordings, it’s not clear how much those decisions added to the $1.7 billion in insured losses for the Alberta floods or the recent $3.6 billion in losses in Fort McMurray, according to Andrew McGrath, spokesman for the Insurance Bureau of Canada.

Cost of Fort McMurray wildfire insurance payouts:
$3.58 billion
(the most expensive insurance event in Canadian history)

Source: Financial Post

Coverage has always had grey areas, notes MacDonald, pointing to insurer ex gratia (goodwill) payments that consider special circumstances or errors. “Claims departments have had to use their discretion in determining whether that claim should be paid or not.” As social pressure mounts, insurers face a starker choice going forward: widen that grey area by covering things they normally wouldn’t or “brace [themselves] for the social backlash and figure out how to respond,” he says.

What does that mean for current coverage? For many companies, the decisions remain clear. “Our policy is to look for coverage in the policy wording, and that has not changed,” says Leonard Sharman, spokesman for The Co-operators, adding that it hasn’t affected underwriting to date. Although the company has made adjustments for some Fort McMurray policyholders, “[they] were a result of working to improve the overall client experience and to address a unique and highly fluid situation,” he says. “At no time did commentary on social channels result in changes in our decisions.”

On some fronts, online chatter has had a positive effect. While Gore Mutual Insurance Co. hasn’t felt “significant” pressure to cover excluded risks, consumer feedback in both Alberta and Ontario in 2013 “highlighted significant gaps in traditional personal lines offerings related to overland flood coverage,” says Anna McCrindell, the company’s vice-president of underwriting. “Many carriers stepped up and afforded coverage where traditionally it wouldn’t have been offered, and this prompted movement in the industry as a whole to look to close this gap.” Gore Mutual—among others—has since created a new overland flood product for most consumers in Ontario.

Along with new products, future policies could present low, medium and higher levels of coverage as separate products to clarify terms and limits, says MacDonald. He notes that when consumers buy a lower-end vehicle, they know they’re giving up performance or safety features. With insurance, “they feel that if they save $200, it’s still the same policy.”

Claims: Speed and Collaboration

Sharman notes that the social media issue highlights claims response more than it does coverage. That’s where most companies have seen a visible uptick in activity post-2013 and during the Fort McMurray wildfire. The evidence? Notably faster claims response. A negative Facebook post about a claim can ignite further bad—and very public—feedback, even as claims staff are working behind the scenes to help them, MacDonald points out. “It’s no longer good enough to wait several days to respond to a concern.”

The Co-operators has added claims capacity to ensure timely reactions to online queries or concerns, and with consumers using new channels to reach insurers, claims staff also need new skills and training to monitor and acknowledge any concerns, Sharman says. Privacy issues can make online claims exchanges tricky, but the reality of social media calls for more collaboration between marketing teams that usually handle social media branding and claims departments, adds MacDonald. Claims staff at RSA Canada are now trained to handle online situations and offer consumers alternate outlets to discuss their situations. “We have to have a triage process that speeds up our ability to respond to these concerns.”

Others are keeping the social media/claims division distinct. “We believe social media skills are best maintained within the marketing department for monitoring, while our claims team will address, escalate and resolve…any specific claims issues raised via those channels,” says Neil Weir, Gore Mutual’s vice-president of claims.

Social media realities often call for extra support for claims workers themselves. Sharman points out that catastrophe response is stressful for staff, and that negative social media pushback “can take an additional emotional toll on them,” he says. His company added counselling services for staff during their work for Fort McMurray policyholders.

Number of personal insurance claims after Fort McMurray:
with an average cost of $81,000

Number of commercial insurance claims after Fort McMurray:
with an average cost of $250,000

Source: Financial Post

Insurers would do well to use social media to get ahead of online backlash during a crisis, a recent Cap Gemini report recommends. “Social media can be utilized to communicate with the insured regarding the claims process, other relevant and timely information, and next steps,” according to the authors of Leveraging Social Media Across the Insurance Life Cycle.

That’s the approach The Co-operators took. With many wildfire evacuees relying on smartphones for any kind of update, the company used Facebook and Twitter to help “manage client expectations about service and speed, as we explained that we were prioritizing claims for those without access to their homes,” Sharman says. It also allowed the company to share information on temporary locations and mental health support services, and provided a way to gather information for brokers.

The Next Front Line

There is still much for insurers to address on both the coverage and the claims fronts. For one thing, it’s clear previous consumer education efforts didn’t hit the mark, according to MacDonald. “We’ve historically attempted to explain that insurance policies and conditions are important, that they need to be aware of the differences.” While ongoing broker efforts to clarify policies for consumers will help, he notes that recent social media feedback has helped pinpoint where they can direct educational efforts. “We still have this conundrum of insureds thinking that all policies are alike. Social media has a role to play in perpetuating that myth or [dispelling] it.”

McCrindell agrees that consumer feedback can help insurers meet their needs and expectations going forward. While Gore Mutual doesn’t offer coverage in Alberta, she notes that the company is watching the trends emerging from Fort McMurray and social media closely, “and we continue to review our products to see if there are additional coverages or flexibility we can afford our customers moving forward.”

It remains to be seen how newfound claims processes, online outreach and targeted add-ons affect policyholders still in the thick of the claims process. Looking ahead, MacDonald predicts insurers will likely see more “grey” areas emerge as rebuilding in Fort McMurray gets into full swing. Although many property policies require homeowners to rebuild houses at their original address, some residents may find themselves the sole occupants of a burned-out neighbourhood. “So there’s one where the insurance companies have to apply their discretion and say…’Are we going to forego that term in the better interest of the consumer?’”

And it’s a safe bet they’ll confront familiar online questions when some rebuilds remain unfinished while others are fully restored. Looking to 2017 and beyond, MacDonald notes that it could be 2013 all over again, with policyholders asking the same questions about their properties versus their neighbours: Why them and not us? “It’s inevitable,” he says. “There will be those who feel the industry has let them down.”

Copyright © 2016 Transcontinental Media G.P. This article first appeared in the September 2016 edition of Canadian Insurance Top Broker magazine

This story was originally published by Canadian Insurance Top Broker.