The Canadian insurance industry is abuzz over the state of the marketplace as the commercial lines market hardens. Carriers are not only pushing for more rate, they’re also re-evaluating their policy terms and conditions, deductibles, and capacity on certain accounts.
“A lot of the markets are starting to pull out and be a little bit more tight in what they’re offering,” said Tyson Peel (pictured), vice president at Burns & Wilcox Canada, commenting on the property insurance market specifically. He pointed to some of the tougher spaces, which include realty, hospitality, and “really tough property accounts like recycling accounts, [where] nobody wants to write them.”
While natural catastrophe losses from fires and hurricanes are primarily responsible for driving hard market conditions in the United States, that’s not necessarily the case back home in Canada.
“In the Canadian space, we don’t get the huge amount of catastrophes that they would in the States with the fires,” said Peel. “We’ve had some fire losses in our books and water damage losses as well, but when you’ve been writing some of the classes of business that the standard markets were writing at such cheap rates and continuing to have the losses, it just catches up with them. A lot of companies right now are really trying to rebalance their portfolios.”
For commercial accounts that are having a tougher time with their insurance placements, the broker becomes a vital tool during this tough cycle.
“Working with your broker is the easiest tool because the broker is supposed to be the knowledge point and can walk through your property saying, ‘You might look at this, you could look at that,’” said Peel. “There are some services that you can get for premium inspections and people come in and do a real good assessment of what your risk would be, but obviously it’s a cost play at the end of the day, so trying to balance how much you want to pay before the insurance and then how much you have to pay for the insurance afterwards is difficult.”
Peel recommends that brokers focus on communicating clearly with their clients in this hard market.
“Definitely being open to their client and talking to them way in advance [is important] saying, ‘This year, this is what’s happening,’” he explained. “It’s really just talking to your client, making sure that they’re well aware of what’s happening in the insurance industry, and what’s happening in their particular space. That’s the hardest point – yes, your capacity might not be there, so you have to prepare them for the fact that they might not get a quote. If you get a quote, take it. You might not like the pricing, but here are the reasons why and just be able to have that open conversation with them.”
Giving insureds the knowledge to understand what’s happening in the marketplace can only be beneficial for both parties to ensure that there’s no unpleasant surprises when the price of insurance suddenly swings upwards by 15-20%.
Moreover, learning to navigate a hard market can pay off in the long-run, considering this is likely not the last one we’ll see.
“We always go through the cycles, and we always seem to kick ourselves in the teeth as we go back down the hill and get back into the soft market,” Peel told Insurance Business. “We have no change in our business plan to amend any of our rating structure or push rates back down, at least not for the foreseeable future.”
