October 24, 2014 by Greg Meckbach, Associate Editor
Changes to Canadian home insurance policies after billions in water-related losses in 2013 are “tough” on the brokers who have to explain these changes to consumers, but brokers can “outshine any other distribution system” by advising customers on how they can reduce risk, executives of some carriers told Ontario’s brokers Thursday.
“We know last year was a tough year with weather-related losses and we had to adapt the property product with rates, deductibles and sub-limits,” said Jean-Francois Blais, president of Intact Insurance, at the Insurance Brokers Association of Ontario (IBAO)’s 94th annual convention in Ottawa.
Blais was alluding to the water losses from catastrophes in 2013 such as floods in southern Alberta, and a July 8 rain storm in Toronto, which were estimated at the time to have insured losses of $1.7 billion and $850 million respectively.
Blais made his remarks during the insurer CEO panel at the IBAO convention.
“It’s a tough time to be a broker because, everybody has been used to auto insurance prices and dealing with that, and now we are heading into a situation where we have coverage and price issues on property as well,” said Brigid Murphy, president and CEO of Travelers Canada, also at the CEO panel.
“If you are a (brokerage customer service representative) on the front line, it’s a tough job,” said Murphy, who also appeared on last year’s panel. “There’s a lot of paperwork … but the reality is, the risk is changing.”
Blais suggested that when Intact explained its home insurance policy changes to brokers, “our first reaction we got was, ‘It’s going to be a tough year, and we don’t like what you guys are putting us through,’ and one broker came to me a few months ago and he said, ‘Initially, I did not like you, today I can tell you I had to communicate to all my customers to explain the changes, and today my retention is better than it has ever been.'”
The panel was moderated by Evan Solomon, host of CBC’s Power and Politics program. During opening comments, Solomon asked attendees for a moment of silence in memory of Corporal Nathan Cirillo of the Canadian Army, who died Wednesday after being shot while on sentry duty at the National War Memorial in Ottawa, less than two blocks from the IBAO convention venue.
Returning this year to the CEO panel was Karen Gavan, president and CEO of Economical Insurance. The other panelists were Greg Somerville, president and CEO of Aviva Canada and Bob Tisdale, president and chief operating officer of Pembridge Insurance Company of Canada, a subsidiary of The Allstate Corp. that sells through brokers.
“I think if the consumer understands that from a loss prevention standpoint, there are lots of things they can do, then they can do their own cost benefit analysis as to whether or not it’s worth it,” Tisdale said. “Is it worth it to not have that finished basement because maybe I don’t want to pay the sewer backup coverage for it? That’s something that the consumer has to look at. Do I want to install a (backwater) valve? Do I want to do different things to protect my house? I think those are all things that are incumbent upon the consumer, but that said, one of the things I think brokers can do, and I think they do very well, is to educate the consumers about why they want to consider doing these things.”
Tisdale cited as an example a hail storm last August in and near Airdrie, Alta, which was estimated by Verisk Analytics Inc.’s Property Claims Services (PCS) unit to have caused $450 million in insured losses.
“Those houses are being fixed with the same vinyl siding that got damaged in the storm,” Tisdale said of some properties in Alberta damaged by hail. “We really need to get the consumer to understand that if they do that again, there is going to be a cost to it, so it’s better to look at it from a longer term strategy and say, ‘Okay, there are risk mitigation things we can do and there is a cost to doing that,’ and how do you go about getting the consumer to understand that either they are going to pay it in premium or they are going to pay it in a self retention, which is a higher deductible?”
Explaining these things to consumers “is really where the brokers can outshine any other distribution system,” Tisdale added. “You can sit down with the consumer and say to them, ‘Look, here are the things that you can do, this is what it’s going to mean from a risk prevention standpoint, this is what it’s going to mean from a premium standpoint and this is what it’s going to mean from a cost standpoint.’ I think it really comes down to getting the consumer to understand what they are buying when they purchase insurance.”
Blais echoed Tisdale’s comments.
“There are many ways you can go at this and as you all know, if we give the consumer some actions they can take to control their exposure, to control their risk, this is where you build relationships,” Blais said. “For sure it’s not easy when you have to pay more or you have to reduce coverage, but I think the long term benefits are there.”
Somerville suggested that one way insurance companies can compete is to be “more open and transparent” with customers.
“The floods taught us a lot of things,” Somerville said. “One of the things they taught us is we likely could have done a better job, collectively, in explaining how the policy works and what is covered and what is not covered”
Tisdale said Pembridge, as well as Allstate subsidiary Pafco Insurance Company, are “dealing with trusted advisors who are looking for consumers who will value the advice that a broker brings to the table and not go after the customer who is just looking for price.”
Gavan noted that studies show “there is a large segment of the consumer base that values the advice of the broker, and there is also a significant pre-disposition that it’s not all about price.”
She added: “I think those brokers that have moved away from (price) as their value proposition and are focussing on giving the consumer the best advice to reflect the risks and the risk tolerance of their customers are the ones that are winning with the consumer.”