Rising material costs, labour shortages and supply chain disruptions have cast a shadow over the property insurance market in recent years.
With thousands of unfilled construction jobs in Ontario alone, to keep up with the current housing demand Canada may need to hire an additional 500,000 construction workers, according to a report by RBC assistant chief economist Robert Hogue.
Justin Faubert, director of claims and operations and senior claims advocate at WTW, spoke with Insurance Business on the current climate and outlined key property insurance trends for Q2, for both homeowners and businesses.
Faubert noted that an increasing number of businesses are submitting larger claims to cover additional expenses, which include costs stemming from delayed material deliveries exacerbated by labour shortages. In 2022, it was reported that Canada’s economy suffered a near $13 billion loss due to labor and skill shortages in the manufacturing sector.
“On commercial claims, we’re seeing larger submissions in terms of extra expense portions of coverage. I’ve seen that more now than I’ve ever seen in the past,” he said.
Faubert also emphasized an uptick in business interruption claims: “You’re starting to see a push on the upper limits of those indemnity periods for business interruption, and what a policyholder is actually able to recover from their policy.”
Due to these delays, projects are not commencing as planned, resulting in additional costs and extended claim processing times, Faubert said.
“Pre-pandemic, you might have seen that claim resolved within 6-8 months. It’s definitely pushing a year now in a lot of cases, especially for significant losses,” he said.
With projections indicating a more severe 2024 wildfire season than last year, insurers are revising policies to address evolving risk trends.
Jennifer Davis, director, head of property broking (Canada), at WTW, underscored the market’s reaction to wildfires as a significant exposure.
“What we saw last year... was insurers introducing wildfire deductibles, and it was underwritten in a similar fashion to earthquake and flood,” she said.
“So, a percentage of values at a location of loss subject to a minimum, whereas previously, the wildfire deductible would be contained within the all-perils deductible. We also saw some insurers saying they could not underwrite business within a certain radius of an active wildfire.”
Faubert is also noticing a rise in the amount of employee theft.
“I’ve definitely seen more employee dishonesty claims than I’ve traditionally seen in the past,” he said. “You have employees who are involved in these very complex fraud rings, where they’re stealing money from their employers through various means.”
Simon Castonguay, deputy leader of corporate risk and brokerage (Canada – East), at WTW, linked the increase in theft to the financial strains stemming from the cost-of-living crisis.
“Given inflation rates and the burden many families are experiencing, the pressure is really high, laying the groundwork for an increase in these behaviours,” said Castonguay.
In response, Faubert emphasized the need for businesses to ensure they have crime policies incorporated into their commercial property coverage.
These policies are especially important considering the growing threat of cyberattacks, as social engineering and fraud are crime endorsements that can also be covered within property policies.
“What a lot of people don’t realize is that money and securities are not considered real or tangible property and are generally excluded by property policies. So that’s where those crime policies come into play, because they cover a lot,” said Faubert.
“It’s a much more purpose-built policy for those clients who have that kind of need and requirement.”
