In my May article “What’s going on with my Property insurance? Where’s my quotation?” we talked about increased premiums and the number of insurers no longer writing certain classes of business in property insurance.
Is pricing and availability for Liability Insurance any different? No – not really.
There are certain classes of businesses where many insurers who may have offered coverage are lapsing renewals and not offering quotations for new business.
And here’s news hot off the press. Insurance companies are in business to make a profit just like any other business owner. When a certain class of business is not generating enough revenue to pay for the claims, they will stop writing that class. It’s no different than any other business owner who can’t sell a product at a loss.
Is there anything you can do? Yes. Here are a few tips for you and some examples of classes of business that are prone to higher losses.
1. Know your premises. Are there areas that could lead to a slip and fall claim? Stairs, parking lots. Keep maintenance logs that record time, dates, conditions of inspections. Normally you will want to have one person or department responsible and keep those records for up to 5 years!
Lawsuits arising from slip and fall claims continue to increase both in frequency and severity. Building owners and snow removal contractors are feeling the pressure of increased premiums. As recently as six months ago, I was aware of several Lloyd’s Syndicates and a number of domestic insurers who were still providing coverage for snow removal. The premiums were increasing however coverage was still available.
Now there are fewer domestic insurers writing this class and many of the Lloyd’s Syndicates have pulled out as well. This is not the first time and it won’t be the last. In a Canadian Underwriter Article in 2002, https://www.canadianunderwriter.ca/features/snow-no-mercy/ they speak to some of the issues; under-priced premiums, increased claims for slip and falls and loosely-worded contracts.
2.Be careful when preparing or signing any contracts. Are their ways of limiting your liability or perhaps transferring that risk? Are you assuming a risk you shouldn’t be? Does a Hold Harmless Agreement work for or against you?
Recently I went to use the services or firm who wanted me to sign an agreement holding them harmless should they cause damage to my property, whether they were responsible or not? Do you ever read those agreements before signing them? Might be a good idea.
3.Obtain Certificates of Insurance. You want to ensure that all suppliers and sub-contractors carry their own Liability insurance. In some cases, you may wish to explore being an additional insured on their policy.
Whether you are a business owner or homeowner, anyone hired to work on your premises must carry insurance. Let’s take the example of the homeowner who decides to create that awesome “great room”. The contractor removes the bearing wall and without the proper support, the entire structure of the roof is compromised. Without insurance to back up the subsequent property damage, the homeowner can be stuck with a huge repair bill.
I’ve proudly represented the insurance industry for 35 years. There isn’t a day that goes by that I don’t see anything negative about our industry. I’ve heard all the stories about increased premiums, poor claims services, crappy claims settlements, underwriting decisions that don’t make sense and the list goes on. Many people are just angry at the industry.
That saddens me because as an insider, I understand. But it doesn’t always have to be this way. We can know our rights and be better informed.
So, let me tell you a story about another industry, one that I recently had an experience with, that opened my eyes to those people who really hate mine.
I recently had a fall which occasioned a visit to the emergency room for a wrist injury. Subsequently I was sent to the hospital for a splint. I was told that I was to have an appointment later that month with Dr. Jones (names have been changed to protect the innocent). A couple days later I was contacted and advised that an appointment had been made with Dr. Smith at a certain clinic and not Dr. Jones as I was advised. The information provided was that it was first-come, first-serve and the clinic opened at 10:30 a.m. I arrived at 10:00 a.m. and was told that the clinic actually opened at 8:00 a.m. and that there was an hour wait for my appointment. I saw that the appointments had been triple-booked for every five minutes. Finally, at 1:00 p.m. (that’s 3 hours folks) I met with Dr. Smith only to be told that I was supposed to see Dr. Jones. Needless to say, I was extremely frustrated but rather than take it out on the individuals involved in this entire process, I did some research.
Apparently, in the summer due to falls, there is an increased need for specialists. The number of patients increases dramatically but the number of specialists remains constant. Thus, the need to triple book just so everyone has an opportunity to see the specialist. Secondly, having been in hospital waiting for surgery, I know that appointments and some surgeries are bumped for unplanned critical situations – car crashes for instance. Lastly, someone made a mistake in booking my appointment. And don’t we all make mistakes sometimes?
So rather than disparage the entire health profession, I chose to ask questions. What were the problems and potential solutions? That’s a discussion I will be having with my MLA.
This brings me back to the insurance industry. The industry in Alberta does have its challenges.
Did you know that of the last 8 catastrophic weather-related issues between 2010 – 2016 that 6 of them were in Alberta? We as consumers are paying for that with our premiums!
Did you know that aside from the Fort McMurray fire, that water claims are more common than fire losses? Over land water claims from floods, sewer back-ups, frozen pipes in commercial buildings and the list goes on!
Severe weather continues to cause extensive damage across Canada. 2018 saw $1.9 Billion in insured damage.
When a disaster hits, the number of claims increase dramatically but the number of trained insurance professionals (adjusters) is the same. It’s no different than the issue of specialists in the medical profession that I mentioned before. Service will suffer but everyone needs to be seen.
Bottom line is it’s time to become informed before we jump to conclusions and disparage an entire industry.
1. Read your policy, ask questions! Did you know that there is no such thing as “covered for everything”? Insurance policies have exclusions and they have them for a reason. Remember, it’s a contract that the insurer MUST abide by. Those contracts are governed by Statute or Civil law and insurers in many cases cannot legally do what you want them to do. Know your rights and responsibilities!
2. Talk with your agent or broker. They are paid either a salary or commission to help you. Ask the questions. Get the answers you need and understand. Never assume anything.
2. The Insurance Bureau of Canada is the Trade Association for the private insurance companies who are members. They have a consumer information line staffed by experienced insurance professionals who are ready to answer any questions you may have – 1-844-2ask-IBC (1-844-227-5422)
The insurance industry is the only consumer product I can think of that has to price its product based on data from the past without having any idea what their costs will be in the current year!
Let’s compare the insurance product to a car. The automaker can accurately predict his cost of goods, labor, overhead, taxes etc. They build in a profit based on what they anticipate they can sell that car for. Easy right?
Now let’s just talk about insurance on property- not auto, liability, cyber risks or the myriad of other products available. Traditionally, insurers could rely on statistics developed over time to forecast future trends. Based on that, they determined the premiums they would charge for that business. Those premiums would have to allow for the costs of all claims, adjusting expenses, distribution costs, overhead costs, taxes and hopefully some profit. Seems simple. Right? NOT!
Add in a factor for competition, changing government regulations and weather patterns that are no longer patterns at all. Also consider rapidly-advancing technologies combined with aging infrastructure and aging buildings and you have a recipe for disaster.
What we see now, in some classes of business in the insurance industry, is the result. Many domestic insurers are pulling out of classes that they normally wrote at very competitive pricing – probably too competitive as they are now realizing. Many Lloyd’s of London Syndicates are no longer operating. Brokers entire contracts are being cancelled across Canada in order to get rid of unprofitable business.
So why should the average consumer care? Because your brokers’ contract to write business was one of those cancelled by one or maybe several insurance companies. They are currently trying to find replacement coverage for hundreds of clients. It could also be because your insurer is no longer writing insurance for high-rise buildings or restaurants, etc. Maybe you had a claim last year. Maybe you haven’t had a claim, but the data indicates you probably will!
That’s where your broker comes in. Their job is not just to find you insurance but also at the best price possible. Not easy! There are hundreds of consumers shopping right now. Yet the number of insurance companies willing to sell certain products has declined. And it’s not just those clients whose policies aren’t being renewed. It’s also those that have seen increases in premium of anywhere from 20% to 120%. They are shopping too.
So, what’s the answer? There is no simple answer. But here are some things you can do.
1. Review your limits of insurance. Don’t reduce them just for the sake of saving money but are you over-insured? Consider an appraisal on your buildings? Some insurers will then provide Guaranteed Replacement Cost. It’s well worth it in the event of a claim!
2. Increase your deductibles. How much can you afford to pay? It’s not uncommon to see $5,000 to $50,000 deductibles on certain types of risks now.
3. Inspect your properties. Are there places where you can work to eliminate the potential for loss? Have you checked the underground sewer lines for blockages? How’s your roof? Does it need repair? Water losses are now more prevalent than fire claims.
4. Before you go shopping ask your broker if they have checked other insurers they represent. A broker who is staying on top of current trends will have a pretty good idea of whether or not your premiums are still competitive.
5. If you do go shopping, find a broker who is willing to really work with you and take the time to do it right. You would never hire an employee without a resume and a reference, so check the brokers’ qualifications, experience and reputation.
6. And finally, be patient. Brokers and Underwriters at insurance companies are experiencing additional workloads as a result of renewal re-underwriting. New business departments are being flooded with new quotes. In some cases, they are getting three times the normal number of submissions.
Some of the above suggestions for saving money may also apply to your other lines of insurance such as auto or commercial liability. We’ll talk about liability insurance in our next blog!
For more information or to answer any of your questions, email email@example.com or give me a call! 587-597-5478.
This is a quote from the movie Network a 1976 film about a TV Network and exploitation. And that’s exactly how I and many insurance industry professionals and consumers are feeling right now. And it’s not about a TV Network. It’s about auto insurance in the Province of Alberta and how the NDP Government are causing hardship to many Alberta Consumers!
In November of 2018 I wrote a letter to multiple political representatives on both sides of our current government. Here’s an excerpt of my letter:
On December 4, 2017, the NDP Government thought it wise to impose a 5% cap on increases for auto insurance across the province. That’s akin to telling all grocery stores that they can’t increase their cost of meat or milk at the retail level when they don’t control their wholesale costs. So, what does the grocer do? He has to make up for his losses somewhere. He has several choices.
1. Stop selling meat or milk at all.
2. Increase the cost of his other products to make up for the shortfall.
3. Reduce the quality of the product he sells.
4. Close all his stores in the Province.;
I can tell you now that this is precisely what you are forcing the private insurance companies in Alberta to do. And guess who is now being affected in a very major way. CONSUMERS – the very people you were intending to help. Yes, and your consumers are your VOTERS!
I am also a consumer and a voter. I am also an insurance broker in Alberta and have been for 42 years. I’ve seen hard and soft markets and this is the worst situation that I have ever experienced in Alberta!!
Here’s a notice from just one of the insurers that my brokerage deals with:
“The unfortunate reality is that when regulators intervene to artificially control market conditions – either because they don’t accept insurers’ data and loss trends, or because they’re politically motivated to keep premiums low – then companies are forced to seek alternative ways of stemming losses, deflecting business and preserving capital.
I know that some of these measures are tough for customers to understand and it’s unfortunate that the industry finds itself in this position. However, these situations only reinforce your role and I truly think customers will see the fantastic value that you provide with your guidance and counsel. On our end, we continue to actively work with regulators and provincial governments to rectify this situation and bring valuable reform to the financial performance and stability of the industry overall.”
Here’s the response from Joe Ceci, our Minister of Finance who continues to ignore and delay in hopes of possibly being re-elected?
“Dear Ms. Cournoyer:
The Honourable Rachel Notley, Premier of Alberta, has forwarded a copy of your November 1, 2018, email regarding automobile insurance in Alberta. Premier Notley has asked me to respond on behalf of our government. As President of Treasury Board, Minister of Finance, responsible for the Insurance Act, I am pleased to respond.
Through the five per cent rate increase limitation, our government’s goal is to strike a balance between Albertans’ need for fair and affordable automobile insurance and the insurance industry’s need for a viable and sustainable market. My department is working very closely with the Insurance Bureau of Canada, the Insurance Brokers Association of Alberta, and insurance company representatives to find the right balance for both consumers and the industry.While we recently extended the cap, we did so for only nine months to give us time to find longer term solutions to the issues industry is facing. To this end, we are conducting a claims and costs study to provide government with information about cost pressures industry is experiencing.
Our government is aware that some insurance brokers, such as yourself, are facing challenges resulting from insurers attempting to reduce their exposure in Alberta by taking various actions, such as cancelling broker contracts, restricting access to premium payment plans, and limiting access to coverage. The Office of the Superintendent of Insurance is monitoring the situation closely to ensure that automobile insurance remains available for Albertans, and that insurance companies remain compliant with the Act. If you have information that an insurance company has violated the Act or its regulations, please contact the Superintendent toll-free by telephone, at 310-0000 (wait for the tone, then dial at 780-643 2237), or by email at firstname.lastname@example.org.
In Alberta, we continue to benefit from a competitive market, and property insurance remains readily available. In order for Albertans to find the best rate and product, I encourage consumers to shop the open market to ensure their needs are met. Insurance brokers, such as yourself, are well equipped to find consumers appropriate coverage at the best price. I also acknowledge that insurance can be confusing and difficult to understand for some Albertans, including seniors. I commend you for your professional dedication in helping Albertans find and understand the coverage that best meets their needs.
Thank you for taking the time to write.
President of Treasury Board,
Minister of Finance”
Just this morning I have dealt with three individuals who have impeccable driving records, no claims and are simply trying to make a living to support their families. All of the following situations are a direct result of our Provincial Government interfering in private industry! I might add that I don’t do a lot of personal insurance. I’m a commercial insurance broker so 90% of by clients are business owners.
1. Insured, who is a senior citizen, has been on a monthly payment plan for years and 30 days prior to renewal is told he won’t have a payment plan this year. He must pay over $1,000 upfront or as of April 30 will have no insurance. This widower is on a very fixed income. So, does he park his car, not buy groceries, not buy house insurance?
2. Long time client of insurer is told they must complete a new application on renewal which the client is doing. By completing a new application, this now gives the insurer the right to not offer physical damage coverage and possibly take away their monthly payment plan. How will this family of 4, living pay cheque to pay cheque come up with $5,000 to pay their auto insurance premium within a very short period of time?
3. Broker in Alberta has had their contract to write insurance with one of their companies cancelled. Insured starts shopping for insurance. Two brokers already have had to turn him away as the companies they deal with will not provide physical damage coverage nor a payment plan. All they can offer is coverage through The Facility Association at an extremely high premium. The client’s insurance expires on April 4! He’s still shopping!
Again quoting the Honorable Joe Ceci:
“The Office of the Superintendent of Insurance is monitoring the situation closely to ensure that automobile insurance remains available for Albertans, and that insurance companies remain compliant with the Act.”
All I can say to him and his government is that it’s not working! The insurance companies are in fact following the letter of the law! The laws the Government of Alberta has put in place!
And it’s the consumers in Alberta who are suffering once again.
Yes, I’m mad as hell and for my part I will keep fighting for my clients!
So, what can you do?
I call on all insurance professionals in Alberta to send an example of hardship caused to Alberta consumers!
I call on all consumers who have been affected or if you know someone who has been call or email.
Superintendent of Insurance – toll-free by telephone, at 310-0000 (wait for the tone, then dial at 780-643 2237), or by email at email@example.com.
No two insurance policies are exactly the same. When it comes to insurance on residential properties purchased with the intention of “flipping”, there are a number of factors that the insurer companies consider in determining the level of protection they will offer and the premium they will charge.
Many insurers will not provide the coverage, others may provide limited coverage and then there are those who specialize in this class and will have various options. Not only that, the companies that will write this type of insurance change based on existing economic conditions and incurred losses.
1. When should I contact my broker about the insurance?
As soon as you know which property you are buying. They can assist you through the process and ensure the paperwork is ready for the bank or finance co.
2. What are the main challenges insuring an older home?
Aluminum wiring and 40 or 60 amp is more likely to cause fires so many insurers won’t offer coverage. If they do, the premiums are usually much higher!
3. How much insurance should I carry?
Coverage can be Replacement Cost (cost to rebuild) or Actual Cash Value (ACV). ACV means that there will be depreciation applied to your claim and you will pay a portion of the cost to repair or rebuild. Many brokers have software programs to help you assess building replacement value on your residential property. What you paid for the house and lot has no bearing on the insurance amount. That is market value only.
4. Is the coverage all risk or named perils?
All risk coverage provides all risk of physical loss or damage subject to standard exclusion. Named Perils only covers certain types of losses.
5. How long should the policy period be?
Just in case renovations are delayed or the house doesn’t sell quickly, it’s easier to purchase an annual policy and cancel when it’s sold.
6. What happens if my property is vacant?
All property insurance has a 30-day vacancy clause. If you don’t arrange with your insurer to add a vacancy permit, you will have no insurance after 30 days.
7. Is there coverage for water damage?
Water damage means anything from sewer back-up, overflow of water from a domestic appliance, frozen burst pipes or flooding. Not all of these may be included so ask your broker.
8. How much do I have to pay in the event of a loss?
Policy deductibles can range from $1,000 up to in some cases $25,000 depending on your loss history and the type of loss. Remember, the higher the deductible, the lower the premium. What’s your risk tolerance level?
9. Are there any warranties in the policy?
So, what’s a warranty? It’s your promise. Let’s say your building is vacant. The insured has provided you with a “permission for vacancy” endorsement with a 72-hour Supervision Warranty. If you do not check the property as outlined in the warranty and you have a loss it won’t be covered.
10. Should my contractors carry insurance?
Absolutely! House flipping has additional liability exposures that your contractors should be responsible and liable for. Ask for a Certificate of Insurance to confirm they have coverage and ensure that they are licensed!
Heather Cournoyer, CCIB, CIP is a commercial insurance expert who loves to take the mystery and confusion out of buying insurance. She does that by working closely with her customers to learn what they do and why they do it. Then she makes sure that the insurance they purchase is what they need and want when something happens. As your broker, she also acts as an advocate when and if her customers have a claim.
Heather makes it a point of understanding changing insurance market conditions. In addition, she can explain the difference in coverage, limitations and exclusions that may apply. She can find the right insurer for the level of protection you need at a price you can afford.