Fiona and Snow Birds

Welcome to Risky Business, Commercial Insurance with Butler Byers. I’m Paul Martin, the host of this show and the business commentator on CKOM, and joining me as always our resident expert, the risk reduction specialist with Butler Byers, Colin Rooke. And Colin, welcome back. It’s great to chat with you again. And one thing about this program is we can follow current events pretty closely. So the thing that’s kind of been capturing attention from an insurance perspective anyway for the last little while is severe weather, more particularly Hurricane Fiona in Canada, and I guess Ian in the US as well. But hurricanes are top of mind and I’m wondering whether, does that have any implications for people in Saskatchewan where we don’t have any hurricanes, but do we need to be thinking about it anyway?

Yeah, I mean, unfortunately we do. The data is out for Hurricane Fiona from the Insurance Institute or Insurance Bureau of Canada technically. And the insured estimates as of now are about 660 million in insured damage. Now that’s actually a relatively small figure compared to the actual damage, just due to the high number of homes that would be in flood plain areas where they actually couldn’t receive any hurricane or flooding insurance. So there’s a lot more damage out there and a lot of it’s going to fall the government. But yeah, 660 million in insured damage puts Hurricane Fiona as the costliest extreme weather event ever recorded in Atlantic Canada. But even more so Hurricane Fiona is now the 10th costliest extreme weather event ever. And again, that estimates only going to rise. And the biggest issue, I guess, for the insurance market and then ultimately the policy holder is just the frequency and severity of these weather events and how we just keep breaking records. Each year seems to be incrementally worse than the year before. And that’s not good, certainly for a property policy.

I mentioned Hurricane Ian when we were starting this and we’ll probably talk more about that a little later in the program because we do have another topic to look at and that’s about travel in the winter time. But as I look at this, I get the sense that there’s just been kind of year, after year, after year, isn’t it, that we’re getting these massive events the wildfires and floods in BC or Fort Mac or now hurricanes. The insurance industry’s been taking it on the chin for some time. And this is just one more. I’m wondering how the industry is holding up financially, like what do the treasuries look like and what does that mean for the rest of us?

Yeah. So it’s a really good point. And again, with Hurricane Fiona being in the top 10 for natural disasters, for insurance payouts, and again, we’re early days, the real issue is the insured amount, these catastrophic losses, they keep growing in nature. As a good example, in the last three years, each year, catastrophic losses has exceeded two billion in insurance losses annually. And that number unfortunately keeps growing. It used to be a rarity, like you talk about the wildfires of Fort Mac, I believe that was 2016 four billion. And if you look throughout history, we’ve had some extreme events that of course have crept up, but they were separated by 10 years, 15 years, seven years. But now you look at recent events and again, total insured losses and it’s a bad trend. And again, when you’re looking at a property policy and all the Canadian domicile insurance markets, I mean, they’re all going to have a hand in Eastern Canada and the Maritimes. And so everyone’s affected. And so unfortunately, unless this trend turns around, I don’t see any real relief on property policies.

Sometime back when we were first talking about these things, say two or three years ago, I think you threw out some numbers back then that said insurance companies look to pay out 60 some cents for every dollar premium that comes in. Have they been able to keep up the premium increases to be able to cope with these big catastrophic events that you’re detailing? Or should we be expecting that the insurance companies are going to have to rebuild their financial balance sheets, their treasuries, and that rates have no option but to go up in a general context?

Yeah, exactly. So although 2022 has proven to be a better year than 2020 and 21, we’re still a ways away from profitability. And certainly when you look at certain sectors like well, residential home insurance, and that is the challenge for the industry, that if they can’t return to profitability, if they can’t return to that sort of 60, 70% combined loss ratio and back into the profit, they really have no choice but to increase rates. Now if you’re saying, Well, yeah but I’m an Saskatchewan, I’m no where near a body of water. I didn’t suffer any effects from Fiona whatsoever. Why am I being penalized? I mean that would hold true if you were with some of the smaller insurers, some of the mutuals, that sort of thing. But I mean if you look at these large national insurance companies, the impacts from, again, the maritime, they’re certainly going to affect your policy here in Saskatchewan as they work to recoup insurance claims payout.

As we’re talking about this, we kind of created the impression, I think that this is mostly for homeowners and the residential side. I’m guessing that if you’re a property owner in the commercial side, if you’re a business you own a property, you’re probably going to feel the same effects here. Correct.

You are. It’s strange. So when you look at Hurricane Fiona, and again, I won’t comment on, this is a broad statement, I don’t want to comment on every insurer in Canada sort of thing, but overland flooding, the impacts of bodies of water, it’s an easier coverage to get on a commercial policy. So when you look at the damage from Fiona, we are in a large part, sorry, when we’re talking about uninsured damage with Fiona, it’s going to be primarily homeowners that just really weren’t able to get this type of coverage. However, again, it’s all part and parcel. Right. At the end of the day, they’re going to say, Well, certain segments of our portfolio are more profitable than others. However, if overall a big insurance company is losing, they’re just going to have to make that up.

So generally speaking, a hurricane anywhere is not good news even if you’re in Saskatchewan. And I think about as we’re recording this, we had Fiona, we had Ian, there was a new one that just hit the west coast of Mexico and last year was considered to be a quiet hurricane season. Looks like we’re going to have a fairly active one this year. In all likelihood, we’re just beginning to talk about this story, right?

Yeah, absolutely. And I don’t really have a solution. It’s going to take a lot of involvement from government and cooperation with the insurance industry, but until we can figure out sort of accurate pricing and work together on sort of where homes are permitted to be built and new construction and climate change, again, I don’t see this problem going away anytime soon.

So Colin, if I’m reading between the lines, is this kind of the first flag that goes up that says, here, put you on notice that we might be heading back into that hard market again?

Yeah. Again, large insured losses, what they do is they’re a great reason, they’re a great rationale. I’d say, Paul, unfortunately the property insurance is going to go up another 30% this year. Reason being insured losses out in the maritimes, I’m sure you can imagine. And so it’s a good segue into the conversation as to a rationale for the increase. And so again, I’m not suggesting in any way that they’re not true, but it makes the rate increased conversation easier. And I think that insurance companies will use this as a means to, again, have rates creep up further.

Yeah. And people will attribute it to inflation. But in fact, it’s probably more about claims experience. All right. We got to take a little break, Colin. So if you don’t mind standing by. You’re listening to Risky Business, Commercial Insurance with Butler Byers. I’m Paul Martin. Back after this. Welcome back to Risky Business, Commercial Insurance with Butler Byers. Paul Martin here joined by Colin Rooke, the commercial risk reduction specialist with Butler Byers. Colin, before the break we talked about what the impact of hurricanes will be on premiums going forward, but I want to change subjects completely. It’s that time of year when there’s a little bit of snow in the province now and people are starting to think about snow and put the word bird together and those who can go South and the migration is about to begin. But and I’m just wondering if you’re a snowbird going South, clearly it’s been a while since we’ve done it. Just a reminder on what are all the insurance things you need to be thinking about while you’re away?

Yeah, it’s funny because we think about, well, wouldn’t snowbirds sort of have their routine, a fixed routine and be aware of all the steps they need to take when they get ready for the big trip? But then you think back to COVID and it might have been quite some time since the last trip down South or trip anywhere for that matter. And so I think it’s important to just talk about some of the things that yeah, you need to think about. For example, when you are planning an extended trip, it’s very important that you talk to your insurance broker and explain, I’m going away for quite some time. It could be 90 days. What do I need to do? So that’s at a high level. Now, very specifically though, you’re going to want to think about, okay, there’s the traditional travel policy for short trips and then there’s more comprehensive policies for these extended stays.

And the policy is quite different. So it’s very important to talk to your broker about things like medical coverage including hospitalization and treatment, emergency return to Canada, reparation of a remain, things like that. Things that you may not have thought about in a long time. And again, certainly if you’re over 55, make sure you’re getting all the information you need around your health and what types of policies you need to purchase or what coverages you want to add in based on your extended trip. And again, just again, a reminder that very different from just a short term travel medical type policy.

Now, we always talk about commercial stuff here, but I’m assuming that Butler Byers is a qualified supplier of advice and policies for anyone who’s looking to travel for an extended period of time down South. But my guess is there’s likely some things that we assume, we just assume it’s good. If I take my car down to North Dakota for the weekend or something, my plate insurance covers me, blah, blah, blah. Is it the same thing if I’m going for all winter?

Yeah, really good point and speaking of hurricane. So if you take a trip to the United States as a one-off, using the United States as an example, you do a oneoff trip. You are for the most part okay, and I say for the most part because I don’t want to comment on every auto carrier in Canada, but in a broad sense, you are okay to take your vehicle for a short trip to the United States as an example. Where you run into trouble though is again on an extended stay.

So if you say, Paul, I’m going to get out of here, I’m going to head to Florida for the winter and I’ll see you in April. And you bring your vehicle and you don’t mention it to your broker who in turn tells your auto provider that you’ll have a vehicle down there. When you phone your broker and report the claim and say, my SUV is completely underwater, what do I do? The insurance carrier’s going to say, well, we had no idea you were down there and we had no idea the vehicle we had insured is down there and we do not intend to pay for damages for a vehicle that was out of province for more than 60 days in this case. So again, very, very important to notify your broker on the vehicle. And there’s also a lot of strategies that you need to think about around your home condo belongings as well.

Yeah, I was going to go there. I mean, so if I go away for let’s say three months, I know in policies, in my experience, 21 days is something that kind of works on the medical side, the emergency medical side. Is there commonality? Is like 21 days when I should be calling my brokers, 60 days? I mean, what advice do you give to people about when do you want to be notified? I’m sure you don’t want to know about every weekend excursion across the line just to go for shopping, but your office would be inundated. But at some point, what advice do you give people about when you should call and when you shouldn’t call your broker?

I think the biggest thing is the advice. If we’re talking about home insurance as an example, if you don’t know what you’re supposed to do, if you don’t know the ins and outs of your policy, I think it’s, well is very important that you reach out to someone and you ask those questions. Again for, well, in some cases short stays, but even extended stays, if you don’t have a plan to have someone check on your home regularly, you may find yourself in a situation where you’ve had a loss that would normally have been insured, but for whatever the reason you didn’t have someone look at your property, looked for broken windows, vandalism, burst pipes, that sort of thing to ensure it was winterized properly, you may be in a situation where you’re facing a decline.

And so for the seasoned snowbird traveler, I’m going to say most would a system in place to look after their belonging. However, if you haven’t thought about it in quite some time, or maybe you’re a new snowbird, maybe you retired during COVID and this is your sort of first extended trip and you’re not sure what to do about your home, reach out to someone and ask them, what do I have to do and what happens if I don’t do it and how much and how often? Just to make sure that when you come back from your extended stay, your home is intact, or at least in the event of a loss, you’re not looking at a denial.

I think you’re saying communication is a powerful tool in all of this and that deal with your broker more than once a year when your policy comes up for renewal. Actually they should be somebody that you talk to two or three times a year depending on your circumstance.

Absolutely. And things change all the time. So again, with this, I call it the travel break from COVID, it’s really important to ask, has anything changed? I haven’t gone to Florida in some time. Is there anything new that I need to know about? And just get the proper information before you go. And that way again, you can enjoy your trip and rest assured that your belongings are protected.

Well, and I’m guessing from an insurance company’s perspective, and we’re just about out of time, so I’ll ask you for a quick response on this, but the demographics are the demographics and the baby boom generation is getting old and it’s a big bulge in our population. I’m assuming that this conversation around snowbirds is getting far more frequent because there’s just a bigger volume of people that are in a position to take advantage of getting away in the winter time.

It is. And from my perspective, it just means a lot of vacant houses that may or may not be looked after. And so find someone, or if you’ve got friends work together, someone’s going to have a grandson that you can pay to every other day just check the whole group. Again, put a plan in place. If you have any questions on what to do, what travel medical insurance do I need, what do I do about my vehicle and certainly how to protect my home, reach out to someone at Butler Byers or your broker and get the proper advice you need. And just recognize that things have changed, things do change, and you may have fallen out of your routine.

Colin, as always very insightful information. Thank you very much, and we’ll talk to you again next time. You’ve been listening to Colin Rooke, the commercial risk reduction specialist with Butler Byers. I’m Paul Martin, this is Risky Business. Thanks for joining us.