Canada has already issued its first wildfire evacuation orders of the year, and the claims adjusting industry is heading into the season with a problem it did not have two years ago: tariffs on building materials that could widen the gap between what a claim pays out and what the repair eventually costs.
Michael Galea (pictured right), senior vice president of national operations at Sedgwick, said the issue showed up clearly during the concurrent catastrophe events of 2024, when four or five major events hit at the same time and insureds were reluctant to settle claims, knowing that repair costs would keep climbing before contractors became available.
"What we found was it became very difficult to settle a claim because the insured does not want to cash out," Galea said. "Especially with tariffs that were being applied at the time that caused extra costs for materials. I can cash out today, but it might be another year before a contractor can come and the price may have gone up 25%."
The problem is structural because multiple peril seasons run at the same time, and the workforce that responds to all of them is the same.
"Wildfire season is also during hail season and hurricane season," Galea said. "So [the challenge is] just resources in general. Contractors and restoration firms, they have limited resources."
Lee Powell (pictured left), vice president of major and complex loss at Sedgwick, said contractors and engineers follow the work. When a major event draws resources to one region, claims in other parts of the country may slow down – not because the insurer is slow, but because there are few resources available to do the repair.
"It has happened in the past where there'll be a fire in Alberta, there could be a flood in Toronto, it could be something happening down south where contractors, engineers [are also needed.] They'll go where the work is," Powell said.
That dynamic creates a secondary claims problem that most businesses do not anticipate. Powell said a wildfire in one province can shut down a major transportation route and trigger losses for businesses that have no operations anywhere near the fire.
"It's a contingent claim – a wildfire happening somewhere else that has a knock-on effect to a business that doesn't even have a location where the fire is, but they aren't able to get the resources that they need to continue operations," he said.
He said he has seen wildfires shut down trucking routes between the west coast and the east coast, forcing companies to reroute shipments or halt operations entirely while they wait for access to reopen. The losses show up as business interruption claims, but the cause is a fire the policyholder may not have even been aware of when it started.
Galea said the resource strain also complicates claims on the residential side. When multiple events overlap, the restoration workforce gets spread thin and homeowners are left waiting – sometimes for months – before a contractor can begin work. In the meantime, material costs continue to move.
He said the adjusting workforce itself faces the same constraint. Canada's province-by-province licensing system means adjusters need to be individually licensed in each jurisdiction where they work. Alberta requires 15 hours of continuing education annually, and June is the renewal period for most provincial licences. When events hit multiple provinces at once, having enough licensed adjusters in the right places becomes an operational challenge.
Powell said the lesson from recent seasons is that the businesses and policyholders that recover fastest are the ones that did the planning before the event. He said more insurers and brokers are now pre-arranging response teams – identifying the adjusters, engineers and contractors they would engage in a catastrophe scenario and getting commitments from them in advance.
"You have to be able to say, ‘Here's our adjusting team, here's the engineering team we would engage, here's the contractors we would engage.’ So having a plan for who you're going to reach out to when this happens, and a commitment from them that they're going to answer your call the day after is paramount."
Galea said the alternative is discovering during the crisis that every available contractor is already committed elsewhere.
"That poor planning is going to cause delays and reopening," he said. "Having that in place can really save some time and save money."
