Consumers should be able to relate to inflation’s impact on goods and services — and hence, the impact on insurers’ claims costs — making it easier for brokers to explain the continuation of the P&C industry’s hard market cycle after the pandemic, Aviva Canada’s CEO Jason Storah suggested to Canadian Underwriter Wednesday.
“I would like to think that when customers are seeing the impact of inflation all around them, seeing continued increases in pricing and insurance won’t feel unusual,” Storah said in a call with CU to discuss the company’s half-year results. “That justification and the rationale for rates continuing to trend upwards, albeit hopefully at reasonable levels, is there because everybody’s seeing how expensive the world is getting around us.”
Brokers were in a harder spot explaining the reasons for the hard market the during the beginning of the pandemic, when policyholders were requesting premium relief. Just after March 2020, governments ordered businesses to shut down to avoid the spread of COVID-19. To date, the virus has killed more than 43,000 Canadians.
“Obviously, the pandemic wasn’t business as usual to begin with,” Storah commented. “And now, I think a lot of customers out there are feeling the sticker shock of inflation, and the knock-on impact of [rising] interest rates on people’s mortgage payments, or the housing sector more broadly.
“But if you go to the gas pump, if you go to the supermarket, if you’re trying to do renovations on your home, everybody sees the impact of inflation. The key thing for me is that brokers have the most important role to play in terms of advocating and helping clients understand the importance of insurance, and what’s happening to their clients’ insurance costs.”
There is always a lag between insurers’ pricing and when claims costs are determined after court decisions are made. Storah noted insurers have been taking corrective action to make up for unprofitable lines of business that evolved through a 10-year soft market cycle.
In the middle of the pandemic, several brokers told Canadian Underwriter they expected that, when businesses came back online, the P&C industry’s market cycle would start softening in at least some areas, leading to premium decreases and elevated capacity to underwrite risks.
But now inflation is raising insurers’ claims costs, and company executives expect hard market conditions to continue as premium rates try to keep up with inflationary claims costs.
“One of the things I’ve heard is, ‘Why is it that rates are still going up after four years, with pretty significant rate increases?’” said Storah. “Well, you know, rates have gone up for years already, but they’d gone down for over a decade previously.
“You’ve got to remember that now, on top of that trend, we’re seeing some of these inflationary trends. We’re hearing from our supply chain there’s no reason to think these inflationary pressures are going to ease off anytime soon. In fact, some of them might run…all the way through 2023.”