In its inaugural thematic review of home insurance claims, FSRA, Ontario’s financial services regulator, uncovered critical
areas of improvement for insurers’ claims handling processes.
The review, published last month, comes as consumers have been experiencing service delays in the adjustment and settlement of home insurance claims. At the same time, there has been increased pressure on property and casualty (P&C) insurers due to rising claim costs, inflation, and supply chain issues.
“We were hearing from consumers about challenges and delays they were facing concerning communicating with their insurance companies,” said Beata Morris (pictured right), director, P&C insurance, market conduct at FSRA.
Morris told Insurance Business that FSRA adopted a collaborative approach to the high-level market review.
“Essentially, it was an open-book test for insurers,” she continued. “We talked to them about industry happenings, spoke to multiple stakeholders, and asked a series of questions. We’ve identified some challenges and areas for improvement in the consumer journey. The ongoing dialogue is already making a meaningful difference and will continue to do so for Ontario consumers.”
FSRA’s thematic review covered 97% of the Ontario market and involved 20 insurers that underwrite homeowners’ insurance in the province. The goal was to find opportunities for insurers to enhance their services for consumers.
The regulator found that there were several areas of potential risk to Ontario consumers:
One of the significant findings of this review was the need for better communication from insurers to consumers.
Morris said: “There’s definitely an opportunity for insurers to communicate with consumers in a clearer manner, faster, and with clear expectations.”
Clear communication about delays, whether due to external factors like material shortages or natural catastrophes, can significantly improve the consumer experience. Morris emphasized the importance of setting realistic expectations at the onset of a claim.
“If there are factors out of insurers’ control, clearly explaining those timelines and communicating those expectations to consumers goes a long way,” she said.
FSRA also found that many insurers were not adequately informing consumers about their internal dispute processes. This lack of transparency can leave consumers unaware of their options when a claim is denied or if they disagree with the outcome.
“Our big recommendation concerning communication is [for insurers] to advise consumers in terms of what it is to expect on the claim,” said Morris, including informing them of any delays and their options for disputing claims.
Another critical area identified was the tracking of claim denials. Morris revealed that not all insurers have a standardized method for tracking and understanding why claims are denied. This approach would help insurers understand denial patterns and educate consumers about policy coverages and exclusions, improving the consumer journey.
“Tracking of claims is an excellent indicator of market conduct and how the policies are working,” Morris said.
The review also uncovered a lack of demonstrated oversight over independent adjusters. Insurers use both in-house and independent adjusters to handle claims. FSRA found that oversight of the latter was insufficient.
“Fundamentally, there were challenges with insurers demonstrating that they had oversight over those adjusters,” Morris explained.
Insurers must ensure that consumers receive consistent service quality, regardless of whether an internal or independent adjuster handles their claim.
According to Morris, non-auto P&C supervision is a new focus for FSRA. Over the last two years, the regulator has expanded its focus, and the home insurance review is one of its key actions towards that goal.
She also highlighted the vital role of brokers in the insurance ecosystem, often serving as consumers’ first point of contact. This frontline access to consumers makes brokers an essential part of the market intelligence that informs regulators and insurers about emerging issues.
“Brokers help consumers even before the claim happens,” she said. “They are our ears to the ground. They usually hear about the issues and the concerns first, before the industry sees it as a concern or even before it comes to the regulator.”
Ultimately, brokers can leverage their unique access points to help the industry improve the claims process.
“If challenges arise with the insurance company, brokers can further advocate for the consumer. In cases of damage, like flooding, brokers help consumers gather estimates and invoices needed by the insurance company, acting as the consumer’s voice and simplifying the claims process,” Morris said.
The thematic review of home insurance practices is just the beginning. FSRA is currently working on other reviews, such as on insurers’ outsourcing functions to P&C MGAs, which will contribute to a comprehensive P&C supervision framework.
Looking ahead, FSRA plans to continue monitoring the claims experience in P&C insurance, ensuring that insurers implement the recommended improvements. Morris is confident that insurers were receptive to the feedback and eager to enhance their services.
“Our message to insurers is clear in the report. There are areas for insurers to improve on,” she said. “Insurers have faced challenges, but they’ve been open about the improvements and opportunities they’re working on.
“We’re confident that highlighting these issues will help insurers with best practices and recommendations. This ongoing dialogue will make a meaningful difference for consumers in Ontario, and we will continue to monitor and identify next steps as needed.”
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