Broker calling for ‘fair treatment’ of some policyholders affected by B.C. wildfire crisis
September 1, 2021 by Canadian Underwriter Staff
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A British Columbia-based brokerage is calling for statutory change to standardize the extension of insurance coverage for policyholders affected by active wildfires in the province.
“We’ve had a few situations where some customers have been left without insurance at a time they need it most. We were battling to find them coverage or extend their policies, for various reasons,” said David Edgar, chief broking officer of CapriCMW, a member of the Canadian Broker Network.
In some instances, customers’ properties were in an area where, prior to the wildfire crisis, some insurance carriers weren’t writing a certain class of business due to the hard market. In other cases, the customers’ properties were within 55 kilometres of an active wildfire and their insurance policies were about to expire — or had expired — during the fires. Some carriers restrict binding new policies or don’t extend or renew coverage during a state of emergency for properties within that radius of the event.
Canadian Underwriter has heard in the past that insurers typically won’t allow binding if there is an active wildfire within a 50-kilometre radius of a client’s property. The restriction area varies by insurer — it could be 25 kilometres or 100 kilometers — and is by map, and not necessarily by driving.
“Most insurers, reinsurers and managing general agents are doing the right thing during the wildfire crisis by extending coverage for customers whose insurance is expiring or renewing while a wildfire is within 55 km of the insured property,” Edgar said. “Insurers’ declining to extend coverage may be seen as unfair treatment.”
In these cases, with the most recent affecting a large hotel client last month, Edgar said he’d managed to escalate complaints. With the help of the Financial Services Authority of B.C. (BCFSA), Insurance Brokers Association of B.C. (IBABC) and Insurance Bureau of Canada (IBC), conversations with the carriers resulted in extension of coverage for those affected.
A pyrocumulus cloud, also known as a fire cloud, produced by the Lytton Creek wildfire rises into the sky from the fire burning in the mountains above Lytton, B.C., on Sunday, August 15, 2021. THE CANADIAN PRESS/Darryl Dyck
If a broker is unable to escalate the matter, a customer is also able to file a complaint with the General Insurance Ombudsman or take the matter to court, which can be costly and time-consuming, Edgar added.
He has since written a paper on the matter offering several recommendations and is lobbying with other like-minded brokers for statutory change, he said.
“The failure lies within the regulatory environment,” Edgar said. “I do believe that B.C. will lead the country in adding a declaration of emergency to the statutory conditions and that other provinces and territories will follow suit in order to achieve harmonization across the country.”
The brokers have met with the BCFSA, IBABC and IBC, Edgar said.
Rob de Pruis, director, consumer and industry relations at the IBC, said a legislative solution may not be the right solution.
The current process is to include a declaration of emergency endorsement in a policy, which extends cover when an emergency is declared until the event is over, de Pruis said.
“The other way [to address the issue] is by speaking to the individual underwriters and explaining the situation,” de Pruis said, adding that the IBC had been involved in facilitating such discussions a few times where insurers had then voluntarily extended the affected policies.
de Pruis added that emergency situations like these “are very rare and temporary […] or they happen coincidentally due to insurers’ risk appetite in a hard market.”
The IBC, therefore, does not recommend a standardized approach. “Insurers have different parameters for coverage and at the end of the day, that’s helpful in placing business. As an industry we can find a solution ourselves if we fully understand the risks.”
The IBC would continue to facilitate discussions and connect customers with insurers to find solutions on a case-by-case basis, he added.
Edgar said his group will continue looking to regulators to mandate a change, since not all insurers are willing to add an endorsement for declaration of emergency.
Feature image: Helicopters fly past the Tremont Creek wildfire as it burns on the mountains above Ashcroft, B.C., on Friday, July 16, 2021. THE CANADIAN PRESS/Darryl Dyck
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Our cabin is amongst a collection of cabins which forms a strata. we’ve seen in the past two years our insurance rates increase by 400% and our broker is signaling that they may not be able to find any insurance next year due to the wildfire risks. we’ve not made a fire claim in our 20 years.
The BC government should establish a crown insurance company that can provide reasonable strata rates and be the Facility when no other insurance is available. this seems to the same set of circumstances that formed ICBC in 1973
ICBC was that insurer right up towards the end of the 80’s. Not only did ICBC write Auto, but also P & C. Obviously you are too young to know.
I don’t think we will be seeing the Government become involved in the P & C sector again, especially in BC where we are continually open to Floods and Wildfires.
The issue is not Insurers, firstly it is the general public who do not have to insurer their properties, because of pricing, therefore are choosing to self insure, until a Fire occurs, then everyone wants the coverage.
As for Strata’s, this sector has been under charged since 2000, and how the the Insurance industry and the Legal community have chosen to settle claims instead of following the Act. If the Strata Property Act would be followed to the letter, the onus of responsibility lies squarely on the Unit Owners and NOT the Strata Corp, however, no one reads the Act as a whole, they are only taking one section of the Act and interpreting it incorrectly.
Lastly, you don’t physically have to suffer a loss to have an increase in rating or deductibles. If you remember the basics of Insurance, it is to spread the losses of the few among the many.
BOTTOM LINE: Brokers need to do their jobs, and instead of increasing the bottom line, they need to analyze the risk to make sure they are placing with the right insurer, and from what I see everyday, that is not happening. Applications are still being submitted with $1000 deductibles on property, or $2500 ded on Water/Sewer Back up. These deductibles should no longer be on the table in any submission.
Brokers also need to tell the client what is in their best interest, and if the client doesn’t agree, you should walk away. In the end, you have to protect the client from themselves and brokers just aren’t doing this, and they are definitely not informing clients of important aspects.
It’s unfortunate that the dynamics of risk and rating are so misunderstood even by those licensed to sell general insurance. The perception that an amendment to the statute conditions of all fire insurance policies in BC will resolve the problem of obtaining or maintaining coverage in an emergency is absurd. Forcing insurers to retain 100% of an absolute risk in the market will simply see insurers withdraw from the classes of business mandated by the statute or entirely from the market place where this obtrusive legislation exists.
You can’t buy insurance on anything where the loss is certain and insurers cannot operate without a return high enough to satisfy their shareholders. Pooling the losses in a facility will simply make all insurers participate in the certainty of loss with no way to avoid participating without withdrawing entirely from the place where the statutes mandate this.
Brokers do you job! Make sure your clients understand the risks and that they carry adequate insurance for it. If you don’t you’ll be to blame for the shortfall.
If a person has paid a substantial amount into the pool already and then their renewal date unfortunately occurs during an event, it is reasonable to require insurers to grant a temporary hold on expiration via a short term extension.
Once the danger has passed, renewal will be required as usual and may include a proportionate increase due to recent events in the area. If a trend is apparent, that increase may be substantial. However, one would think that a home owner who has maintained a dwelling for a period of time would be well aware of the level of risk in their area.
With regard to losses, why not have graduated coverage dependant on age of policy?
When losses occur close to the initiation of a policy, the level of coverage should reflect the level of payment targets which have been reached by the insured.
Standardized industry payment targets would need to be determined in advance of implementation.