A lot of time and effort in 2018 will be spent reviewing this past year, which could be characterized as “the year of the water claim.” Almost all Ontario mutuals were exposed to one or more heavy rainfall events in 2017. The year provided the first significant test of the impact of the new overland water coverage introduced over the past couple of years. Compounding our “local” events, the global reinsurance market is digesting the impact of wildfire events and a severe hurricane season.
The full domino effect of losses will be felt in 2018. It will likely affect not only rates, but also cause many insurers to re-examine risk selection, as well as how to match risk profiles with coverage limits and features. Water models are developing at an accelerated pace and much of this becomes an analytical exercise, with each insurer taking a unique approach to implementing analytic outputs.
In non-weather-related news, many auto underwriters in Ontario are reporting a deterioration in results and awaiting government signals on the potential for significant reforms. While the prospect of reforms is positive, it won’t do anything in the short-term to bring rates down.
Interestingly, while a trend toward autonomous and/or safer driving technology should have a positive effect on loss experience, it also presents a potential challenge if the need for traditional forms of automobile insurance is reduced.
Adding to the fun in 2018, the legalization of cannabis across the country will certainly create social change and debate. The insurance industry should be able to adapt to the required changes in a straightforward manner. However, if the experience in Colorado is any indication, it takes some time for the full social effect to be quantified and addressed.