A storm is brewing as catastrophes in Canada become more damaging to communities and costlier for insurers. According to Catastrophe Indices and Quantification Inc. (CatIQ), it’s increasingly common that annual insured losses from catastrophes exceed $1 billion. Since 2008, Canadian insurance industry catastrophe losses have amounted to $17.4 billion, with four of the five most expensive events from the past decade taking place between 2011 and 2016, though last year was no walk in the park either.
“[In] 2018 specifically, the industry saw 10 CATs and eight notable events, and these events were actually more driven by frequency rather than severity,” said Heather Masterson (pictured), president and CEO at Travelers Canada, highlighting the windstorm in Ontario from May 2018. “We had significantly more first notices of loss reported to Travelers Canada than we had for all of Fort McMurray in 2016.”
The data is showing that this will continue to be a trend, and a challenge, for years to come.
“When you look at the period of 2013 through to 2015, and you compare that to 2016 to 2018, the average CAT loss for 2013 to 2015 was $1.6 billion versus what we saw in the last three years, which was $2.7 billion – that was the average year total,” said Masterson, referencing CatIQ figures. “The total between 2013 and 2015 rolled up was $4.8 billion versus the last three years of $8.2 billion, so we’ve really seen an increase in nat-cat losses.”
Several years of rate erosion due to soft market conditions isn’t helping the Canadian insurance industry either.
“If you think about what insurance entails and the purpose of insurance, it really is about the losses of the few being funded by the premiums of the many, and it’s imperative that we have this relationship between rate and risk that matches,” said Masterson. “Carriers today, I think, after experiencing years of rate erosion from soft market conditions, we’re looking to seek rate adequacy both on an individual account basis as well as on a portfolio basis, and that’s really important to our brokers and to our customers because it’s important that we have financial stability and we have viable healthy products to offer.”
With the difficult years that have just passed, due to natural catastrophes as well as the hard-to-avoid topic of unaffordable auto insurance for consumers and insurers, Travelers Canada is focused on paving a way to profitability.
“How can we achieve a really measurable and thoughtful approach to our overall rate-risk relationship to ensure that, going forward, we have a high degree of stability and predictability for our brokers and for our customers? So that’s really what we’re focused on right now is securing that path to profitability,” explained Masterson, though technological change and evolving consumer expectations are also playing a role in influencing the direction that the insurance industry takes.
“At the same time, we’re really focused on improving our product,” she said. “We think about that transformational opportunity that we have – how do we have the best-in-class products in the insurance industry, [and] how do we service and deliver those product offerings in a way that we’re truly being customer-centric? And we’re deploying technology and innovation to help us do that.”
Travelers Canada’s four strategic pillars, as it sets out its mission to be “the undeniable choice for our customers and the indispensable partner to our brokers,” according to Masterson, include putting a spotlight on financial and operational excellence, being authentically customer-centric and focusing in on the broker experience, having a commitment to culture, people, and engagement, as well as advancing technology and innovation in its business.
Meanwhile, the broker will continue to have a key role in the Travelers Canada distribution channel. Through its initiatives with broker associations, including the proof of concept around data exchange and the plan to bring real-time data to brokers and insurance companies, ongoing work on an automated first notice of loss set to launch in 2019, and its advisory groups, where brokers have provided feedback on a new policy platform for small commercial, Travelers is putting brokers front and centre.
“We have actually set up two broker advisory groups within Travelers Canada because we have substantial technology deployment that’s going on right now – internally we call it Program Propel, and the name has been derived because we’re looking to propel ourselves into the future and ensure that we meet those needs,” said Masterson. “We’re very focused on our broker. We’re a broker channel insurance company, so a lot of our work is focused on what does the broker need in order for us to collectively and jointly service the needs of the end customer.”