How might an economic slowdown impact commercial insurance in Canada?

How might an economic slowdown impact commercial insurance in Canada? | Insurance Business Canada

How might an economic slowdown impact commercial insurance in Canada?

The COVID-19 pandemic and resulting shutdown measures have thrust the global economy into a severe contraction. The World Bank recently predicted the global economy would shrink by 5.2% in 2020, marking the worst global recession since the Second World War. While the “Canadian economy appears to have avoided the most severe scenario,” according to the Bank of Canada, the country’s short- to medium-term economic future remains highly uncertain. What’s clear is that many Canadian businesses are struggling financially at this time, and they’re looking to their insurance partners for assistance.

“When the economy is slowing and customers face their top line contracting, having the right insurance partners is critical,” said Jonathon Reise (pictured), Director of Commercial Auto Underwriting at RSA Canada. “Some customers will look to complement their main operation and expand into new areas, taking advantage of emerging opportunities. Having a broker and market who can support them in that expansion, and have the expertise to help them go beyond what they’re currently doing, is going to be key.  As well, they should be looking to work with a market that can provide creative risk control services and find workable solutions that don’t necessarily have an undue impact on their expenses. Every dollar they’re spending on maintaining and running their business has to count.”

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In commercial insurance, it’s rare for end-clients to transact exclusively with carriers. They access the markets via an expansive network of commercial insurance brokers in Canada. But it’s important to remember that while helping clients navigate the impact of a pandemic-induced economic slowdown, brokers themselves are under significant financial and operational pressures.

“If you look at how insurance has been traded since COVID-19 started, it’s shifted dramatically, and I think some of those trends will continue long-term. They’re essentially just an acceleration of trends that have been simmering in the marketplace for a while,” Reise told Insurance Business. “There’s a greater importance now placed on brokers being able to transact digitally with their customers across all areas of that customer lifecycle. There’s also a growing demand from customers to be able to either self-serve mid-term, and engage in different ways throughout the term of their policy with their broker partners.”

Alongside the transition to digital, brokers are always looking for meaningful ways to drive business and engage with prospective, current and future customers, especially during times of crisis. To help with this, RSA Canada offers a wide range of public-facing tip sheets and advice via and the RSA Canada LinkedIn page. The insurer is actively sharing timely and relevant material via these channels to help brokers drive business, stay productive and be the best possible partners to their commercial clients during these challenging times.

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“In addition to underwriting and risk management support, RSA has implemented relief measures of around $75 million in savings for our customers” Reise added. “While we do everything we can to support our clients and broker partners during an economic slowdown, as an insurance carrier, we’re not immune to the broader economic trends. Our focus is still going to be on underwriting discipline and proactive management of our portfolio, to generate profit from our underwriting activities. During uncertain times early identification of emerging trends is critical. COVID-19, for example, could lead to an increase in bankruptcies, an increase in vacant operations, or even adverse claims trends that may come about as a result of an economic slowdown, and we’re going to be on top of those trends.”

Reise joined RSA Canada in 2002 and has seen first-hand how the insurer weathers economic storms like the 2008 recession and the possible pandemic-related recession to come. He said the challenge with COVID-19, compared to the 2008 recession, is the immediacy of the event. The current economic slowdown has been caused by policy level decisions around social distancing and non-essential business closures made by governments. Those decisions were implemented very quickly, and commercial entities – including insurers – have had to respond in an equally prompt manner.  

“One thing I would reinforce to our broker partners is that RSA Canada is here to support them,” Reise stressed. “We were able to quickly and smoothly transition to a remote working environment, and our underwriters are actively engaged in finding ways to help brokers win, add new business or retain their existing customers. In some of our business units, we’ve actually seen growth in new business revenue through this lockdown period. That’s because our underwriters are active, they’re ready, and they’re coming up with the solutions necessary in order to support the customers and the brokers through this challenging time.”