The summer of floods that hit southern Alberta and Toronto revealed that climate change is dealing Canadians some pretty rough weather – and that policy holders are still opting for the cheapest policy without fully understanding the implications of how exposed to risk they truly are.
But beyond the water damage, Albertans are hit year after year by wind and hail damage – more than any of their provincial counterparts.
What can brokers do to remedy this situation? Can the consumer be convinced to spend more to be properly covered?
Lina Tityk-Keon, vice president, personal lines with Rogers Insurance in Calgary, Alta, knows too well the impact Mother Nature has on that province’s industry.
“Sixty-two per cent of all natural disasters that occur in Canada happen in the province of Alberta,” says Tityk-Keon. “I do believe the consumers need to understand – and it is the responsibility of the insurance companies – the impact that these natural disasters have on the industry, and on their premiums.” (continued.)
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Educating the client and the public is crucial to making these policies work, says Tityk-Keon, as the industry was basically shamed into placing a lot of the flood damage claims into sewer back-up, after the public outcry in the media.
“Although some companies have covered a portion of the flooding – and there was evidence of sewer back-up – that was a courtesy,” says Tityk-Keon. “It was a very liberal measure that insurance companies decided to take following the public outcry.”
Teresa Bristow, executive vice president at Western Financial Group in Alberta, agrees that educating the public is crucial to encouraging them to select the right coverage.
“For all of the disasters and exposures that are becoming more prevalent as an industry, educating our customers and the public is becoming more crucial,” she says. “There are ways to mitigate loss, particularly with water, you can mitigate loss. With hail and wind, there are materials you can buy to reduce damage.”
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Keeping the lines of communication open with the client is important, says Bristow – especially when it comes to education on what is the right coverage for their needs.
“Education around self-insurance, higher deductibles and rate increase demands we as an industry play a bigger role,” she says. “It is important that we shop the right coverage to our customers. It is important that their requirements are understood. Not everybody needs the same level of coverage, and we need to recognize that.”
Part of providing that education for the client is offering a variety of choice.
“Consumers are more savvy, they are more price conscious. Customers want that menu of choice,” says Bristow. “But it takes an event like flooding, when you have something in the news that they become more aware of what coverage they need.”
Flooding coverage is necessary, says Bristow, but the real question is how should it be presented and what the cost should be. (continued.)
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“I think over the years there has been discussion about offering flood coverage on a personal product, and the question always remains, will it be available for those in the flood plain or flood zone?” she says. “Would they be able to get it? And if they could, what would the price point be? Can we price that product so that it is affordable and available for those with the exposure. “In my experience, consumers will want to choose the products that suit their needs. I don’t think making coverage like that mandatory would work.”
Tityk-Keon agrees that the media attention surrounding the Alberta flooding has made consumers more conscious that flood insurance is something they should take seriously.
“This summer is the first experience we’ve had of a situation of this magnitude,” she says. “We had flooding in 2005, but it didn’t affect his many homeowners. I’m a big advocate of educating our consumers. But unless they are affected, as much as they understand it – they don’t understand it unless it happens to them.”
Unlike flooding, the data available on wind and hail damage is more readily available to insurance companies, says Tityk-Keon. But there is room to alter the approach taken to wind and hail damage right now. (continued.)
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“We are studying that, and there are areas that are more prone to that. There are areas that are harder hit, so they are able to price that more adequately – unlike flood insurance,” she says. “If you take someone with a 25 year roof, and in the 23rd year we get a hail storm, does the quality of that roof warrant a full replacement, when really it only deserves a depreciated value?”
Although there are many questions about how to better offer and price flood and wind and hail coverage, it is incumbent on the insurance industry to take the reins and lead the way.
“Going forward, we need to be careful about the communication that we are offering to our clients, because the products are changing quickly,” says Tityk-Keon. “And we need to be proactive in telling our insureds in the limitations of the policies they are taking.”
