Brokers are openly discussing how insurers’ flood catastrophe losses will affect them over the near and immediate term.
"The issue around floods is far from over, and brokers will need to continue to manage customer expectations and focus more than ever on education," said Randy Carroll, CEO of the Insurance Brokers Association of Ontario (IBAO).
"Policies today vary greatly between companies in regards to coverages, limits and deductibles when it come to water damage.
"Even though flood specifically is excluded, consumers need to know what their policy will and will not respond to in advance of a potential loss, so we as brokers have a lot of work to do to help them get there."
Meanwhile, it turns out that claims were already on the increase, even before the floodwaters started to rise hit in June and July, according to figures recently released by MSA Research.
Overall, the industry showed a 7.4% increase in claims against a stagnant 1% growth in net premiums earned. This was partly driven by a higher number of losses in Ontario accident benefits – up to 64% in the first quarter, compared to 50.5% at year-end.
Commercial insurers performed well on the whole during the first quarter of this year, although their results were somewhat worse than during the same quarter last year.
“Commercial writers were riding pretty until the water hit the fan in Calgary, with a COR of 89% at 2013 Q1 – two points worse than 2012 Q1 and one point better than the full year of 2012,” MSA president Joel Baker said. Citing the flooding in Calgary, he added: “We expect the party to end in 2013 Q2.”
Personal lines and multi-line insurers had their COR results balloon from 95% during the first quarter of last year to 98% in 2013 Q1.
The headwinds facing the personal lines space, which include elevated catastrophe activity, vulnerability in Ontario auto, and potentially weaker auto results in Atlantic Canada, “do not bode well for this market segment,” said Baker. “Although we’d be pleased to be wrong, we expect it to run an underwriting loss this year.”
The losses and stagnant premium sales offset a significant 20% improvement in the industry’s investment income in 2013 Q1.
