Tornadoes in Ottawa and Gatineau, wildfires in BC, and summer storms in the Prairies are adding up, with the Insurance Bureau of Canada reporting in September that insured damage from coast to coast has exceeded a billion dollars. The warmer temperatures and higher sea levels that contribute to natural catastrophes are clearly wreaking havoc on communities in Canada and globally – one only has to look to the south to see Hurricane Michael’s destructive path in Florida.
“We believe that climate change is having an impact on the world, and that is impacting weather events,” said Monica Ningen, president and CEO of Swiss Re Canada. “The events continue to happen, and they continue to happen at a higher frequency and a higher severity than what we’ve seen in the past.”
The insurance industry has a key role to play in mitigating the effects of natural catastrophes and raising awareness around climate change, whether it’s by crafting a flood solution for risks that are not insurable or coming together with tech companies to figure out how their solutions can help to develop tech-based products aimed at flood or wildfire risk.
“Insurance companies are trying to get a handle around what are we insuring, how do we insure it, and do we feel comfortable with the concentration of risks that we have?” said Ningen, pointing to flood maps and modelling as an important application of technology. “The combination of better mapping and better modelling has really transformed people’s willingness to actually look at that exposure as something they can assess, that they can actually monitor, and that they can get their heads around.”
Nonetheless, the delta between insured losses and economic losses known as the protection gap is still high. According to Swiss Re, an estimated US$4 trillion (about CA$5.2 trillion) has been lost over the past four decades globally to extreme natural disaster events and, of that, US$2.9 trillion (about CA$3.8 trillion) was uninsured. The global reinsurer has also determined that only about 30% of economic disaster losses are insured on average. The question then remains, is the industry doing enough to raise awareness on the importance of insurance and develop effective mitigation strategies?
“Are we having the impact fast enough to outpace the increase in losses that we’re seeing? The impact is there, but we’re actually seeing the losses continue to be higher so that means the rate of change is not keeping up with the rate of losses,” said Ningen. “From a mitigation standpoint, insurance companies have a voice with their consumer to help [them] understand what those things could look like.”
It’s not always easy to motivate consumers. If they have the option of retrofitting their home in preparation for an earthquake or replacing a countertop, which both might cost $2,000, their view might be that an earthquake is never going to happen in their lifetime or that they’ll take their chances. That’s where brokers can be especially impactful since they have a presence in their communities and the ear of their clients.
“The big part that they play is around educating [and] listening to the consumer in terms of what the consumer wants, and then trying to find the right product, the right coverage for them, and if they don’t understand the risk, helping them to understand the risk,” said Ningen. “When the broker doesn’t understand, then [they can go] and get educated themselves on how they can be more consumer-friendly and ultimately try to figure out how to meet those needs.”
Ningen added that research shows consumers tend to trust their government to help them after a catastrophe more than they trust insurance companies, which is another area that professionals in the industry can focus on improving.
“As we go into that world, we have to adapt to be able to give consumers the products they want and give [them to] consumers in the ways that they want, and a part of that dialogue should also be building the trust and the brand proposition that we have to those consumers,” said Ningen.