Controversial Guaranteed Replacement Cost (GRC) coverage to be extended to commercial lines

At a time when some B.C. insurers believe eliminating guaranteed replacement cost (GRC) coverage would eradicate under-valuation of personal lines homeowners policies, ING Insurance Company of Canada announced it is piloting a project to introduce GRC coverage for commercial lines policies.
GRC coverage typically promises to rebuild a home or a building after a total loss despite the limit shown on the policy. The coverage has come under fire in B.C. as part of a wider industry debate about insurance-to-value.
Insurers typically provide GRC coverage in homeowner policies, but some worry under-valuation of properties and resultant premium inadequacies threaten to undermine the consumer protection GRC is supposed to provide in the event of a loss.
The topic came up at a CEO panel of the Insurance Brokers Association of B.C. conference in Kelowna, B.C.
AXA Pacific Insurance Company executive vice president Jennie Moushos observed during the panel discussion that (without saying she agreed with this point) some have argued eliminating the GRC would give homeowners an incentive to make sure they have properly valued the possessions in their homes. The GRC would not be available to cover them otherwise, she noted.
Several brokers at the conference pointed out homeowners do not deliberately under-value their homes for any reason (much less, reasons related to the GRC); rather, they said, values are skewed because of a myriad of reasons, some of which have to do with the assumptions underlying the calculation of values.
But the GRC in personal lines is here to stay, ING Insurance Company of Canada president Derek Iles said. Not only that, but ING is preparing to introduce GRC for commercial lines coverage.
“We are piloting GRC for commercial lines,” Iles said. “The reason we are doing that is we think there is some opportunity for customers in specific segments, with the right controls and the right appraisals being done, the loss controls, the follow-up and execution, to get the pricing right and then you have to execute it long-term and keep it that way.”