March 30, 2020 by David Gambrill
Canada’s fragile economy is what’s keeping everyone in the P&C insurance industry awake at night.
The unknown future of an economy that is almost certainly headed for a global recession figured in the Top 3 answers of what P&C insurance industry professionals fear the most about the COVID-19 pandemic, according to a recent online survey conducted by Canadian Underwriter.
More than 315 industry professionals answered the question: ‘What are your biggest concerns right now?’
Just a shade over 51% of respondents said their biggest concern was a global recession, and what that will mean for their P&C business.
The level of concern could not be higher. Sixty-nine percent of industry professionals surveyed said a pandemic-induced global economic recession would result in “more challenging” P&C market conditions than when hijacked planes struck the World Trade Center in New York City on Sept. 11, 2001.
Canadians have been urged by public health authorities to stay at least two metres apart from each other to help slow the spread of COVID-19. But as people stay indoors, and as the public demand for goods and services shrinks, Canadian businesses have been forced to lay off staff.
Many in the survey expressed concern about the fear of layoffs and the negative impact that might have on staff morale in the P&C industry (particularly if self-isolation were to last several months). One respondent, for example, reported being “worried about employees should things get really bad.” Another P&C organization employee openly wondered: “Will I be laid off?”
Canadian Underwriter conducted its survey two days after provincial governments in Quebec (the hardest-hit area in the country with 2,840 COVID-19 cases) and Ontario (1,355 cases) both listed insurance as an “essential service.” This exempted P&C businesses from provincial government orders to shutdown all “non-essential services” that could not operate entirely online.
Not surprisingly, the fear of an economic recession has led to industry concerns about the impact on their clients, which ranked a close second in the survey. About 51% said they were worried about “managing the needs of clients who may not have the means to pay premiums (or who may want to cut their contracts short).” About 36% reported being concerned about “counselling clients who have lost/are worried about losing their jobs/businesses.”
In anonymous written responses, one respondent commented that he or she expressed concern about “outdated regulation that does not address pandemic times when it comes to how we notify customers, cancellations, payment options, etc.”
And what happens when you layer a pandemic on top of what was already a challenging P&C market?
This was uppermost in the minds of 46% of survey respondents.
One respondent worried about the “impact of crashing bond and equity prices on P&C carrier balance sheets in Canada.” As equity markets crash (meaning less income is available for insurers to buttress inadequate pricing), and as premium growth dries up because businesses in Canada are closing, industry professionals are concerned about what this will mean for market capacity down the road.
“As someone who works in a specialized area of insurance, I am worried about insurance companies pulling out of writing specialty coverages so there is less capacity in the marketplace,” one survey respondent said.