September 22, 2020 by Adam Malik
The property and casualty insurance industry needs to to a better job of ensuring that basic coverages — such as protection from water and fire — are available to clients and that there isn’t a protection gap, said Matt Wolfe, president of Aon Reinsurance Solutions Canada.
Ensuring clients have the basics covered off means being able to then sell additional coverages that are important but not at the top of a client’s mind, Wolfe added. He was speaking as a panellist during the Insurance Institute of Ontario webinar, At the Forefront: From the Great Fire to COVID-19: What’s next for the Global Reinsurance Market.
Wolfe cited flood coverage in Canada as an example of basic coverage that should be readily available but is where a gap exists. “To this day, flood coverage in Canada is a bit spotty,” he said. “It’s a bit of a Catch-22: If you live in an area where you need flood coverage, it’s very difficult to get. If you don’t have any flood exposures, it’s very easy to get.
Covering off the basics is important, because coverage for plenty of new and emerging risks — such as cyber and pandemic — also needs to be sold, Wolfe said.
“The point is, as an industry, we need to step up and try to do better on our additional products and getting people to buy those,” he continued. “Look at the earthquake take-up rates in Vancouver. I think it’s basically 50-ish percent where it’s not required. And look at Quebec, which is also an earthquake zone, and I think the take-up rate there is something like 2%.”
The fallout from the global pandemic provides a timely example of where the insurance industry can “do a better job,” he said. “You start off with solutions that the customers actually want to buy. Here is a real challenge for the public, for businesses, and frankly I think we have not offered them the kind of solutions they’re looking for. That’s something we need to look at.”
Addressing issues like pandemic business interruption coverage is essential in his eyes. He hopes the industry is able to deliver on some kind of standalone pandemic insurance product.
“Exclude it from all the other products,” Wolfe said of standalone pandemic coverage. “If you want pandemic [coverage], or you want COVID [coverage], you go and you buy an explicit product for that. That would allow us to charge for it, allow us to track our limits on it. Presumably, though, demand may exceed our industry’s capability.”
That’s where a partnership with government comes into focus. He cited the U.K.’s Flood Re initiative, which sees a partnership between insurers and the federal government. The private industry takes a certain amount of risk, and the government takes its own share.
“Hopefully we can make our way that way on COVID,” he said.
Feature image by iStock.com/ z_wei