In a recent call hosted by the Insurance Bureau of Canada (IBC) to members of the media, the bureau answered questions that many consumers have asked in relation to the recent wildfire incident that has swept parts of northern Alberta.
Regarding worries that claims adjusters have been deployed in the area, the bureau has reassured consumers that there are none in Fort McMurray.
“There have been stories on social media and elsewhere about claims adjusters on the ground,” said IBC western and Pacific vice-president Bill Adams. “I can assure that is not the case. There are people from our industry on the ground in Fort McMurray who have been contracted by the province or the municipality to come in and prepare the critical community assets — the hospital, grocery stores, pharmacies, hotels.
When asked about reports from the BMO that industry-wide insured losses would reach $9 billion, the bureau clarified on how the estimation was reached.
“They’ve used technology,” said Adams. “A lot of the map applications, satellite imagery, etc., have been used by our industry to get some sense of the scope of the loss by their particular company.”
While access to the Fort McMurray area has yet to be granted, some insurers are offering their loss estimates. The Cooperators General reports 4,376 claims have been made thus far for property, auto, commercial and farm insurance claims, estimating an after-tax cost between $70 million and $90 million. Aviva has received roughly 3,000 claims so far from the Fort McMurray area, “just shy of 2,000 being homeowner losses”.
Some consumers had worries that the wildfire would be classified as an “act of God,” and thus cannot be covered. The bureau said otherwise.
“That issue of ‘act of God’ is a common insurance myth that comes up no matter what the disaster,” remarked IBC director of government relations Heather Mack. “Insurers pay for fire damage. It’s got nothing to do with this act of God term, which is actually not a term that’s used at all in property insurance. It’s not in there, full stop. It’s not an issue.”
Mack also confirmed that most home and tenant policies will include coverage for any additional living expenses for those homeowners who cannot return to their properties due to the mass evacuations.
When asked what effect the fire would have on the insurance industry, the IBC executives answered that they themselves do not know whether premiums would increase or not as a result, citing the number of claims made as the best possible predictor whether or not the rates have to be adjusted accordingly.
“The single largest expense faced by every single insurer is claims. They really are the predictor of what future trends in cost for the premiums that people pay will be. While we can’t predict what’s going to happen in the future, we can look at what’s happened in the past,” Adams explained.
“If you see claims going up year over year, it’s likely that premiums will follow. As claims start to subside, there’s a lag before you see insurance rates come down in response. Globally, these type of events are happening with greater frequency and severity,” he added.