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It’s time to break down artificial barriers that impact claims response

April 10, 2024 | By: Liam McGuinty, Vice-President, Strategy, IBC and Mark Cripps, Manager, Communications, IBC
Nova Scotia’s wildfires

Canada is experiencing large-scale flooding, historic wildfires, and devastating hail and windstorms at a frequency never before seen in this country.

Last spring and summer’s disasters, including more than 5,000 forest fires, resulted in estimated insured losses that to date exceed $3.5 billion. In 2022, catastrophic weather caused $3.6 billion in losses. This followed two straight years – 2020 and 2021 – when insured losses rose to approximately $2.5 billion a year.

These extreme weather events are part of an alarming trend linked to climate change. Not only are they resulting in billions of dollars in losses, they are putting people and property at risk.

Seven of Canada’s top 10 insured loss events have occurred in the last four years, and there is little indication that this trend of escalating loss events will abate. Many climate experts in the provincial and federal governments predict that 2024 could be another difficult year in terms of extreme weather.

Extreme weather in Canada has garnered extensive media coverage. But when the cameras leave and the media shift to other stories, what’s overlooked is that in the wake of every large-scale catastrophic weather event come challenges in managing and resolving the enormous volume of claims.

Canada’s property and casualty (P&C) insurance industry has seen a massive increase in the number of claims resulting from the increasing frequency of extreme weather events. To put this into perspective, from 2004 to 2013, there were roughly 694,000 claims related to extreme weather events (e.g., any event that results in $30 million or more in insurance claims). Over the last 10 years, that number has risen to well over 1.3 million, a 93% increase.

In recent years, the lingering skilled labour shortage – particularly in less populated regions – and ongoing supply chain disruptions have created a challenging dynamic that is testing the P&C insurance industry’s claims capacity.

To address and adapt to the challenges, insurers have renewed their efforts and are modernizing and improving their claims processes. These efforts include:

  • Increasing the level of communication between insurers and claimants (e.g., by using phone and email messages or online portals) so that claimants remain informed about their claim and the claims process

  • Embarking on significant recruitment of and retention efforts for relevant staff (e.g., in-house adjusters, claims staff)

  • Creating expedited claims-handling processes, including through the assistance  of automated, digital property estimates

  • Bringing together specialized field teams to help manage complex losses, such as those associated with natural catastrophes.

These efforts to adapt to the challenges created by increasing catastrophic weather events seem to be working. In the last year, there have been fewer claims-related inquiries to the General Insurance OmbudService, and insurers’ intense focus on improving the claims process seems to be a contributing factor.

However, the claims capacity of the P&C insurance industry will be tested for years to come, as it adapts to the “new normal” of more frequent and severe weather events.

This is where government regulators can help. When claims capacity is at its limits, such as in the aftermath of a large catastrophic weather event, insurers will often turn to independent adjusters and external adjusting capacity to boost their claims response.

Yet there are often challenges in mobilizing these adjusters across provincial borders because every province has different adjuster licensing requirements. This means that out-of-province adjusters require permission from the regulator to work in the province and even then, the period of time they are allowed to work in the province is limited.

In 2022, the Financial Services Regulatory Authority of Ontario (FSRA) created an expedited approach for out-of-province adjusters entering Ontario to help address claims related to the devastating derecho wind and rain storm that impacted a large swath of the province. This was a welcome move by FSRA, but begs the questions: Are Canadians best served by having 12 different sets of adjuster licensing requirements across the country? Is an adjuster’s job in Alberta so vastly different than one in Ontario or Nova Scotia?

The industry’s view is that these barriers are artificial and are impacting the industry’s ability to respond to policyholders in times of crisis.

There is hope that this will be rectified. A coalition of insurers has come together to raise awareness of the need for change. Insurance Bureau of Canada (IBC), the Canadian Association of Mutual Insurance Companies, the Canadian Insurance Claims Managers Association, the Canadian Independent Adjusters’ Association, the Insurance Brokers Association of Canada and the Canadian Association of Direct Relationship Insurers are calling for full reciprocity of adjuster licensing across the country.

The coalition is encouraged that the Canadian Insurance Services Regulatory Organizations is launching an Adjuster Licensing Committee to look into the issue. We hope the committee is the start of a long-awaited solution.

In the meantime, Canada’s P&C insurers will continue to review and revise their claims processes to meet the growing challenges of climate change.

About This Author

Liam McGuinty is VP, Strategy, at Insurance Bureau of Canada. In this role, Liam focuses on advancing strategies and responding to issues that are pan-Canadian in nature. He also leads IBC’s strategic and corporate planning process. Previously, Liam served as IBC’s VP, President’s Office where he supported the CEO in advancing IBC’s strategic and operational priorities. He previously worked at Deloitte and the Ontario Chamber of Commerce, and has a Master in Public Policy from the University of Toronto.

Mark Cripps has a Bachelor’s Degree in Journalism, and spent 25-years of his career as a journalist and editor working across Ontario. He also worked for 8 years as a Press Secretary and Director of Communications for the Ontario Ministry of Municipal Affairs and Housing and Agriculture, Food and Rural Affairs. He has been with IBC since 2019, and manages communications for Western and Pacific Regions, as well as the commercial insurance file.