In Western regions of Canada, property and casualty (P&C) brokers are intimately familiar with fire maps. New personal homeowners’ insurance policies often do not get placed in summer months. Commercially, risk services teams and divisions are busier than they have ever been historically.
In many ways too, the broker’s role is changing perceptibly. On the ground there is no such thing as a quiet season anymore. Renewal conversations are more involved. Advocacy is becoming a greater part of the role.
Executives working in P&C brokerage business describe this as a tumultuous time. “I would expect rates to be increasing over the next couple of years,” warns Charlotte de Wynter, vice president of personal insurance with Navacord, in an interview with the Insurance Portal. “I think people should be prepared for that.” She similarly warns that increased deductibles could be a thing for wildfire losses in the future, similar to the industry’s treatment of earthquake coverage.
“Earthquake coverage deductibles in British Columbia are a percentage of your building limit on your insurance policy. Sometimes it’s as much as 20 per cent. So, your earthquake deductible may be $300,000 or $400,000 to insure your home,” she explains. “I don’t think it’s going to get that high immediately, but I do see a future in which the insurers have to say they will no longer carry the total loss.”
Fires impair new business work
Today wildfires are having a huge impact across the board, not the least of which is on the way fires impair a broker’s ability to place business, as carriers generally block new business from being placed when there is a wildfire within 25 kilometers. In commercial insurance, brokers say this perimeter is generally up to 50 kilometres.
“If the fire is usually within 25 kilometers of the home we’re trying to insure for new business, we can’t write that policy until the fire goes out,” de Wynter explains.
The situation can lead to scenarios where clients are stuck with their current insurers, can’t change coverage and can’t move anywhere new. “If you’re purchasing a new home, it becomes very difficult to do so in the summer months now,” she adds. “I would say, year over year, this is happening more and more.”
Even on Vancouver Island, she says until about three years ago, insuring homes wasn’t a concern generally because the fires weren’t happening in that location. “I took a look at the map yesterday. I think we have seven active fires burning on the island, limiting our ability to write in places like Victoria and Nanaimo, as well as out to greater Vancouver,” she says. “We’re seeing fewer and fewer home sales happening in summer months because of this.”
Although realtors are now becoming more aware of this, telling clients upfront that it might be an issue, there was a time when some were upset after home deals fell through. Today, closing dates are being pushed off until September, October and November.
“It has made our job more difficult because of that restriction for placement,” de Wynter notes. “For our brokers, it can be difficult because it feels like they can’t help, right? For new business, they’re fielding these calls and going through the process but they’re not being able to find that policy.”
Should a client have existing insurance, this will generally renew. If the risk doesn’t fit the insurer’s criteria (having an aging oil tank is one example), insurers will sometimes renew for 90 days so clients are not left without coverage.
In commercial meanwhile, Larry Grant, vice president of HUB International’s national forestry practice, says businesses within range of a wildfire which insurers find unacceptable will generally have their insurance renewed.
“It gets tricky in some cases where values need to be increased. Some will renew based on the expiring coverage, saying once the fire is under control they will revisit extra valuations,” he says. “The majority of insurance companies will give us the opportunity to make those changes regardless because it’s an existing client partner. We’re treating it as a standard renewal.”
The amount of consolidation occurring among insurers is also different today than in the past. It was noted by observers that insurers are very well equipped to handle large scale losses and move relatively quickly when these occur, but it was also observed that homeowners’ claims adjusters, for example, are not as plentiful on the ground and as readily available as they perhaps were in the past.
Awareness changes the dialogue
With clients, executives like Crystal Petrie, vice president of operations with HUB, say the frequency of incidents is increasing, making more people aware of the risk, which wasn’t always the case. “Awareness is great; it’s something we can do something with,” says Petrie. “If they don’t perceive the value, it makes those conversations harder. I think more and more clients really understand the value of having a good insurance policy that’s going to respond if and when these situations happen.”
Similarly, Grant says lessons learned from past experiences have helped brokers be more proactive in their approach. “We can now share the story,” he says. “Past incidents have provided us with the opportunity to have proactive discussion. In the past it’s been a fairy tale – we were telling stories, saying ‘what if?’ Well, now we know what happens,” he adds pointing to the lessons learned from the Fort McMurray fire. “There is a definitive case study.”
Commercial prevention efforts, meanwhile, are more dramatic today, as well, with some insurers engaging loss consultants, even private firefighting teams in cases where there is a large asset to protect.
Clients too are more proactive, says Shawn Bower, Navacord’s director of risk services. “They’re putting plans in place. They’re getting pumps. They’re getting fire ponds set up. They’re making sure their fire hydrants are operable,” he says. “I’ve really seen an increase in that over the past five years because these events are happening almost every year. You can guarantee there’s going to be some forest fire activity.”
He also notes that building values have also escalated tremendously in the past five years as the price of lumber, steel, aluminum, electrical and mechanical components have climbed dramatically. Updating these building values has become an important part of the broker’s role in placing new business and renewals.
At Markel Canada meanwhile, Marc Copland, vice president and property product line leader, notes that helping commercial clients with mitigation efforts has always been part of the commercial broker’s role. “Transferring risk, that’s only one part of the role,” he says, adding that discussions about building resilience into a property by considering sprinklers, updated roofing material and other mitigation measures, have always been part of the discussion.
“I would say now what’s different is that the world is changing at such a rapid pace,” he adds, noting that an advisor’s role today can also encompass conversations about cyber threats, supply chain threats, catastrophe, wars, regulations and trade deals. “Brokers are involved in all of these things with their clients,” he points out. “They’re more a strategic advisor than just an insurance placer.”
Advocacy is another area where insurers and brokers are more engaged than perhaps they have been in the past – executives point out that municipal and provincial governments, disaster relief funds and others all have a role to play and they are increasingly being called to task by the industry to play a bigger role in risk management. Among the measures noted, they say governments can affect building codes, give access to certain sites, invest in public fire protection and create rules for wildland-urban interfaces where urban areas meet wilderness.
“We are also involved in establishing safety standards,” Copland says. “Initiatives that are backed by insurers to make everything safer and more resilient, especially to fire.”
Interprovincial barriers which limit adjusters’ movements across the country are another area where the industry’s advocacy is being noticed.
“There’s still a lot of work to be done on that front,” he adds. “There’s a lot of stuff that governments can be involved in.”
The broker’s job today
Understanding the risk clients’ properties are exposed to and relaying that information to insurers in such a way that underwriters are comfortable assuming the risks presented is the first part of a broker’s job. Working together with all on deck in a catastrophe scenario – advisors, service teams, claims teams and teams on the ground are all described as working together well in response to wildfire events – is the task at hand when crisis occurs. Talking to clients is paramount. Post-crisis, meanwhile, brokers are then describing their roles as advocates for their clients throughout the claims process.
Ahead of time, Bower says commercial brokers need to double check and keep a close eye on applications to make sure business continuity plans are in effect. Business interruption exposure is a serious conversation to be had, as many tend to take out 12 months of coverage when 24 months is by far more appropriate. Having business values up to date is also critical.
At this point, engaging risk management services offered by companies like Navacord, he says, will also showcase a client’s commitment and dedication to risk management and loss control. “It shows them in almost a best-in-class light to insurance companies,” he says. “We’re always trying to tell a story for our clients that they are engaged.”
Unlike homeowners’ insurance, where mitigation efforts generally do not impact premiums or coverage, in commercial such mitigation efforts do actually have an impact on the cost and availability of insurance.
“When we say we made these recommendations on September 7 and they were completed on September 9, think of the story that tells to an insurance company,” Grant says. “That’s the kind of people (an insurer will) want to partner with.”
In personal lines, ahead of time conversations will include discussions about mass evacuation limits, freezer and contents coverage. Mitigation efforts can include referring clients to resources like the widely regarded FireSmart Canada website.
In claims situations, Petrie says the broker’s role is then to bridge the gap between those who’ve suffered a loss and the claims departments at the insurers providing coverage. “On top of providing information, answering questions, selling people insurance, we also see ourselves as advisors when it comes to information sharing.”
To that end, HUB’s regional offices each have their outreach efforts that can include emails to affected postal codes and YouTube channel advice for evacuees. The information sent to clients will include their policy numbers and helpful links, even if these are not related to their client’s coverage.
“One of the major pieces of feedback that we get from clients who come into our office after an event like this is ‘I didn’t know what to do and your email helped me in a time where I couldn’t think,’” she says. “When we’re in that fight or flight fear response, we don’t know what the next step is. We’re able to communicate that to clients.”
Proactive versus reactive
Those who discussed the matter with the Insurance Portal say they are expecting another severe wildfire year next summer.
Grant warns that you can’t selectively pick when danger is near. Forecasting and prediction, beyond knowing that wildfires are now an annual threat, he adds are impossible. “The tough part about it is that it can happen overnight,” he adds. The sentiment is echoed by Petrie who points out that recent fires in her area left residents with less than an hour’s notice to evacuate.
Ongoing, Grant encourages brokers to educate clients, like clockwork, on an annual basis. “We have to be proactive with our client partners,” he says. “Educate them on what the wildfire season looks like and how it could impact them either with a claim or without a claim. There’s nothing worse than being reactive.”
Mitigation matters
For homeowners, messages to clear debris from the property are beginning to land more effectively than in the past. “Right now, our insurer partners do not provide any discounting for wildfire mitigation,” de Wynter says. “Doing that will not reduce the cost of your homeowners’ insurance.”
As for that changing, she says insurers, particularly in higher rated and higher risk regions will likely need to get more granular about home locations. “This has happened over the last 15 years or so with respect to floods,” she says. “That’s going to follow that same path for homeowners’ insurance when it comes to fire, as well.
Despite not making a material impact on premiums, it’s been noted by organizations like the Intact Centre on Climate Adaptation at the University of Waterloo that 70 per cent of homeowners receiving the centre’s infographics on flooding and wildfire preparedness, will take at least two actions within six months to protect their homes which they wouldn’t otherwise have taken.
These measures can include creating defensible space where combustible material is cleared away from the home, removing fuel canisters, waste and vegetation – both to deny fires the fuel needed to perhaps ignite the building, but also to give firefighters safe space to work.
As buildings are constructed too, there is a growing movement to encourage those building to replace with upgraded materials that are fire resistant.
Bower, meanwhile, helps commercial clients to build out mitigation plans, getting them to work with local fire departments to integrate their plans with local authorities. Copland similarly looks for plans in place to manage critical functions. “How can we back those up?”
Lessons learned from previous fires, however, include the fact that backups also need to be planned carefully.
Bower says experience with the company’s school board program led to the understanding that all backup power sources need to be taken into consideration, for example. Schools in Fort McMurray were untouched by fire but sustained significant smoke damage when emergency backup generators fired up, bringing HVAC systems back online. “It was pulling smoke into all of the schools. The smoke damage, that was excessive,” he says. “Part of a preparedness program (now) is to shut down, close up, kill the power, shut off the natural gas and make sure that any backup generators are off and vents are closed.”
Across the board those interviewed for this article say the claims process is not anything anyone wants to go through if they can help it, making most receptive to brokers’ advice about mitigation and, hopefully, resilience.
“They’re generally really excited to explore our (risk management) services further,” Bower agrees.
“If they've had a claim, they don't want to go through that experience,” Grant also agrees. “No matter how good the insurance is paid, the claims process is onerous, and it's not fun. Even when they get their full policy limits, it's not an enjoyable experience.
