The new Apple iPhone X is now available for pre-order, with prices starting at a “mere” $1,319. Canadians will undoubtedly flock towards this top-of-the-range trophy cell and only think twice about dishing out $1,000.
But while people are happy to pay big bucks for a new phone, many shy away from the idea of setting aside a few hundred dollars to protect their homes from a catastrophe like an earthquake. This reluctance to purchase catastrophe cover might stem from a widespread misunderstanding of risk, according to Balz Grollimund,
Swiss Re’s chief underwriter for Canada.
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The earthquake protection gap in Eastern Canada is huge. According to Swiss Re, only 3-5% of residents in the eastern provinces purchase earthquake insurance. This is one of the lowest take-up rates of any region worldwide.
But what can brokers do to combat that gap?
“Price is always relative. If we want a new iPhone we will be willing to pay $1,000+ for it. Earthquake cover in eastern Canada is going to cost a few hundred dollars for the average home, but most homeowners consider that expensive,” Grollimund told
Insurance Business. “It comes down to the perceived value of what you get for your money, which leads back to risk awareness.
“If a homeowner is unaware of their earthquake risk or doesn’t really perceive that risk as something that might affect them, then a few hundred dollars might be considered expensive. Insurance brokers need to make sure their clients understand their personal risks and have the understanding to make an informed decision about how to mitigate those risks.”
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One way to illuminate earthquake and flood risk to potential insureds is through risk comparison, explained Grollimund. Most people have a relation or know someone who has been involved in a car accident. We can relate to it and understand that we might be involved in a car accident as well.
When it comes to natural catastrophes, especially earthquakes, hardly any of us have any experience to relate to. But, depending on where an individual lives, the chances of being in an earthquake and being involved in a car accident might be quite similar.
“The insurance industry, specifically insurance brokers, need to figure out a way to make earthquake risk comparable for clients,” Grollimund said. “They need to say - your chance of being in a car accident is X and the chance of your house being damaged by an earthquake is Y. Comparison between those risks gives a good basis of decision for the homeowner or business owner on whether or not to buy earthquake cover.”
Related stories:
Why is the earthquake protection gap so big in Quebec?
Stop ignoring the earthquake risk in eastern Canada
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