Insurers were watching closely last week as Hurricane Humberto gained strength over the Atlantic, and Tropical Depression Gabrielle inched her way northward along the seaboard towards Canada’s east coast.
It is an annual ritual for insurance brokerages in the Maritimes, says Liz Cosgrove, Insurance Brokers Association of Nova Scotia Director, with Macdonald Chisholm Trask Insurance.
“Certainly preparing Atlantic Canadians for possible weather-related events has become part of what we do on a regular basis,” says Cosgrove. “I think we would be naive to suggest we don’t worry about weather in Atlantic Canada; we are obsessed with it and perhaps rightfully so.”
Beginning Friday and lasting over the weekend, Tropical Storm Gabrielle interacted with a cold front from New England, bringing heavy rainfall to New Brunswick, Nova Scotia, Prince Edward Island and western Newfoundland.
Meanwhile, the first hurricane of the 2013 Atlantic hurricane season – Hurricane Humberto – continued to develop in the far Eastern Atlantic, but was not expected to make landfall.
But for insurance brokers, no matter no little or great the potential risk, they must always be prepared. (continued.)
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“Brokers are like many other businesses when it comes to weather related claims, the primary difference is we need to be up and running immediately to help customers with their claims,” Cosgrove told InsuranceBusiness.ca. “If not, we have failed as a service provider. From a budgeting perspective I would suggest brokers not rely on Contingent Profit Commissions to meet bottom line expenses. I realize that is easier said than done, but the reality is with increasing claims, weather related or otherwise, and deteriorating loss ratios CPC cannot be viewed as reliable source of income.”
John Pino, of MacLeod Lorway on Cape Breton, has seen global warming increase the intensity of storms and claims from clients.
“Hurricanes are indeed becoming a fact of life in Cape Breton,” says Pino. “With the temperature of the ocean gradually rising, these events are occurring more often; yet preparedness among the populace is still minimal, although getting better. Aging infrastructure makes it difficult to handle excess water which inevitably results in water entering homes. It is certainly something that, as a broker, we anticipate to become an issue every autumn.”
The rise in claims has in turn forced upwards pressure on premiums – something east coast brokers have to explain to clients more than ever before.
“Recent premium activity in the personal property line has certainly caused insureds to take notice of what is happening, and many are becoming very aware of the co-relation between claims experience and their premiums,” says Pino. “For the past number of years, many insurers have taken drastic measures with respect to their personal property business which ultimately results in the broker having to explain premium variances. An event such as a hurricane or even an active hurricane season is just an extension of that explanation.” (continued.)
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Despite the increase of storms hitting the east coast, most people still ignore the warnings issued by the authorities , says Glenna Boudreau of Vaughne Assurance Ltd.
“The first time I started taking tropical storms/hurricanes seriously was Labour Day weekend in 2010 when Hurricane Earl was supposed to make landfall in Yarmouth, Nova Scotia,” says Boudreau. “It was a category 4 hurricane coming up from New England. The majority of the people in Yarmouth didn’t take it seriously and most didn’t make preparations despite many public service announcements.
“As it turned out they were right, it missed Yarmouth and made touchdown further up the coast, and by that point had been downgraded to a tropical storm. I think the only people that take a hurricane warning seriously in Nova Scotia are those who were hit by Hurricane Juan a number of years before.”
Preparation is key to mitigating damage, says Boudreau, who herself invested in a back-up generator.
“As an insurance broker it is important for our office to be prepared and open for business to take the claims. I invested in a heavy duty generator in 2009 for the office,” she says. “I know our region will be hit at some point so it’s important to be ready and have a plan.”
And like her counterparts, explaining why premiums are rising to the client are just a part of doing business – part of the education process. (continued.)
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“Our property claims have been increasing since 2011 due to weather-related claims, mainly water,” says Boudreau. “We have had the discussion many times with the consumer on rising insurance premiums. We also have sent out mail blasts and created posters about it.”
Education is key to ensuring the client has the proper coverage, adds Cosgrove, but the economic reality is that many are forced to file a claim as they cannot take the financial hit.
“While education is an important aspect of every broker’s job, I also believe when a consumer is faced with a decision of whether or not to put in a claim which will affect their rating and ultimately their premiums, they are also forced to look at their finances,” says Cosgrove. “In today’s difficult economic circumstances, many homeowners can no longer afford to absorb the loss themselves and despite our counsel they have no alternative but to put forth the claim.”
