At the most recent insurers' round table at the Regroupement des cabinets de courtage d'assurance du Québec (RCCAQ) conference, a session was devoted to questions from brokers, which were submitted in writing.
The first issue raised on Nov. 3 concerns the difficulties of underwriting and pricing cybersecurity products for businesses; the amounts of coverage offered being insufficient and the protections too limited.
Éric Champagne, vice president of Promutuel, explained that the insurer offers a generic product that targets the largest possible number of businesses, with three levels of coverage.
"We are currently selling a $50,000 limit. We agree that's not enough. We're on your side and we're asking you to see if you can sell $100,000 or $150,000 limits, with pricing to match," said Jean-François Lussier, vice president of Northbridge Insurance.
At Economical, Glen Bates, VP Commercial Insurance, Eastern Canada, confirmed that the insurer offers pre-set amounts at $50,000 and $100,000. "After that, our approach is very conservative. It's possible to buy a higher limit, up to $2 million, but it's hard to sell, because the premium is determined by the reinsurers. And it's still very difficult to find the right rate," he said.
Jean-François Desautels, vice president of Intact Insurance, pointed out that the industry is struggling to identify the extent of the phenomenon. "Some countries have systematically nationalized cybercrime. Putting a premium on that, putting coverage expected by businesses, by your customers, is extremely difficult."
“We like to innovate at Intact,” said Desautels. "In this case, our cautious side encourages us to take our time. If we offer inadequate products, with inaccessible coverage, I think no one wins," he said.
At L'Unique General Insurance, chief operating officer Yves Gagnon said the insurer's product offerings are very basic. "We are working on a more substantial product. We should launch it in the next 12 months."
Gagnon said the product will focus on businesses the insurer is already familiar with. "The more complex cybersecurity risks, there are specialists for that, and that's not necessarily our niche," he said.
He added, "There aren't really specialists in there making money as we speak. What we develop will match our appetite for the risks we cover, never for big specialty risks."
Insufficient discounts
Another broker said that his clients spend a lot of money on security equipment, such as vehicle tracking and residential water damage detection. He said that insurers offer discounts that are too low, even though these devices help reduce the volume of claims.
"At Intact, we will increase the list of recognized providers and review how we can help customers protect themselves. We will also review the discounts," said Jean-François Desautels. He added, however, that home insurance premiums are rather low in Canada and that the profitability of this segment is still precarious.
Desautels said that with the help of brokers, the insurer has installed tracking systems on all Toyota RAV 4s in the metropolitan area. "On the island of Montreal, one in six vehicles of this model is stolen." Criminal networks adjust and target other vehicles when the vulnerability of a particular model is limited.
Champagne noted that there is no link between the discount offered and the investment made by the owner of the insured property, but rather between the discount and the loss experience. Louise Rivet of Wawanesa made the same point.
Policyholder input is needed to reduce damage in home insurance, said Glen Bates of Economical. "It's sometimes hard to explain to the customer that insurance is a global market, but if the bill for large claims goes down, it helps everyone."
Commercial Lines
The following questions focused on hard-to-underwrite commercial lines segments (such as restaurant owners, condominium corporations, plumbing, etc.), which mainstream insurers are reluctant to write. Insurer executives have stated that they have not withdrawn from the Quebec market, as they did in 2021.
Wawanesa has only recently begun to operate in Quebec in commercial lines, but Louise Rivet said that the insurer writes more than $1 billion in premiums in Canada in this market. "We want to work with brokers to find solutions. We don't exclude a certain class of business. In Quebec, we are risk selective based on our appetite. We're going to be selective, but we don't say no to restaurants," she said, the same for other risk categories.
Éric Champagne said that underwriting criteria are stricter for new operators with less business experience, particularly on the restaurant side. He added that Promutuel has even increased the volume of premiums written with condominium corporations.
Brokers often have to use the services of MGAs to place their commercial risks with specialty insurers. Glen Bates said that MGAs have distinct expertise. "They are there to service non-standard clients. We have a limited appetite, it's true. We're very selective in underwriting, we don't have a choice," he said.
Regarding the role of MGAs, Jean-François Desautels said that some insurers, including Lloyd's Underwriters, have decided to distribute their products only through MGAs. "Will other insurers emulate this strategy? Sometimes the agreements are only for one year. It's not a long-term commitment like we have here, to stay for a long time on the same risk," he said.
"Do brokers prefer to have a direct contract with their insurer, or do they prefer to run a significant portion of their portfolio through an MGA? That's a question for the future of commercial lines distribution," said Desautels.
Labour shortage
Labour shortages were the subject of the last question posed to insurers. While connectivity between brokerages and insurers will help reduce the need for staff, Eric Champagne said that there are still many brokerage management system and policy management system vendors among insurers. "There is a certain lack of standards, especially in commercial insurance. I think insurers, along with brokers and associations, can develop or enhance that information exchange in the ecosystem," he said.
This article is a Magazine Supplement for the December issue of the Insurance Journal.