Rate Updates

Home For Business Risky Business Podcast Rate Updates

Paul Martin and Colin Rooke discuss rate updates for commercial and personalized policies.

Listen to the full podcast here, or read the transcript below.

Paul Martin:

Welcome to Risky Business Commercial Insurance with Butler Byers. This is Paul Martin, the business commentator on CKOM, and joining me, Colin Rooke, Commercial Risk Reduction Specialist with Butler Byers. And today, Colin, we’re going to take a break. We’re not going to talk about forest fires, we’re not going to talk about cyber. We’re going to just get into stuff that real people can understand or that would bump into is applicable to real people every day. And that’s just where rates are going. And over the course of this program, we’ve talked a lot about how volatile rates have been and what are some of the driving factors behind them. And the very core of this show is how you become a better customer of the insurance industry so you can get better rates, better coverage, all that sort of stuff. So where are we? We’re coming up to the midpoint of the year here as we record this show. And have you got some trends or indicators? Can you tell us which way premiums are going this year and is it surprising or is it really what you were anticipating?

Colin Rooke:

Yeah, so I’m going to talk about both the rates on commercial policies and personalized policies. So we typically spend a lot of time talking about commercial, but I find the really interesting trend is actually on the personalized side and very specifically to Saskatchewan, but overall when it comes to commercial rates, so we are still seeing rate increases, but the rate increases are decreasing. So we have the data in from Q1 and most of it in from Q2, and we’ve seen two quarters now where although rates are going up, they’re at a lower percentage than previous quarters. So we are seeing pricing start to go the other way.

Paul Martin:

The trend line is flattening out now?

Colin Rooke:

Yeah, it’s flattening out. So there’s a lot of talk of, is there a market softening? And I wouldn’t say that, I would say that it’s starting to normalize, but I will say we are for sure out of the hard market where you’re looking at staggering increases with really no rhyme or reason. And specifically when it comes to commercial insurance, some of the really hard hit areas like construction and hospitality, I mean if anyone’s listening that works in a restaurant or in the hospitality industry, hotels, they, they’re seeing more capacity. So rate going the other way, more options, which certainly for those, it’s a really good trend. I mean, they, throughout covid were hit with almost unaffordable year over year increases. But the good news is that, yeah, the premium increase, the percentage increases are decreasing. And so we are going in the right way and we talk about being a better customer of the insurance market. So these are the averages. So the worst case is in there too. The most claims written customer that will ever listen to this show, you are in there. And so it just shows you’ve got more opportunity to work on your presentation to the market and really earn those discounts because they are there and capacity is opening up and there’s more markets looking for a new business.

Paul Martin:

Over the course of time, we talked about how the insurance companies were really facing a situation. There were so many catastrophic claim years that they were going to have to rebuild their treasuries. And if I’m hearing you right, they may be catching up to that where they had drained those treasuries, paying claims in really rugged years for the industry, and now they’ve been playing catch up. Now you’re saying they might’ve caught up a little bit?

Colin Rooke:

Yeah, they have, and again, depending on the industry, there are some sizable decreases out there. And it’s typically for those industries that were the hardest hit. So again, back to hospitality, for those that have long memories, they’ll say, sure, my premium’s going down, but it’s nowhere near the 2018, 2019 level, but some relief is good. They said, look, we have paid out too much in claims. We have to recoup that. And I think now they’re saying we’ve recouped quite a bit and now we can go out and grow the book again. We’re feeling confident that more rate is warranted, but we can back that off a little bit.

Paul Martin:

Well, it’s probably reasonable to assume that we’re not going to go back to 2018 rates. I mean, we’ve been through a bout of inflation here. Obviously the value of property and buildings in particular factors into this in a big way. And you don’t have to read very much in the way of headlines or listen to the news every day to find out that man housing and construction costs have gone up dramatically. I think about, especially on the institutional side where governments were projecting what it would cost to build a hospital or whatever, and when the tenders come in, they’re actually double or more that the cost of construction has gone up. And so that’s got to be factored into today’s premium, whether you like it or not. And it’s not going to take us back to 2018 is sort of my point.

Colin Rooke:

Yeah, you are correct. And that’s going to be evidenced in sort of the next segment where we talk about home insurance premiums and why they’re on the rise. But just to give some sort of final context closure at this time in 2023, the average rate industry-wide in Canada increase was 8.9%, and now across all lines is 6.81. So it is turning around, it’s going any other way. But yeah, back to your comment about rising construction costs and where does that money come from? Home insurance premiums are increasing across Canada, however, the two hardest hit provinces overall by a significant amount are Saskatchewan and Manitoba. So across Canada, roughly 8% year over year increases. However, in Manitoba and Saskatchewan, you’re averaging about that 12%. And again, that’s the best and the worst in here. So depending on who you are in that spectrum, it could be quite a bit less, but also quite a bit more.

Paul Martin:

Well, you’ve obviously piqued our interest now, home premiums, personal lines, premiums in Saskatchewan going up faster than pretty much any, any other part of the country that’s going to make us sit up and pay attention, I guess. And the logical question is going to be why, what comes out of that? And then maybe I’ll get you, we only have about 30 seconds before our break, so maybe get started on that and then we’ll talk a little bit about when we come back, about what we can do to protect ourselves, if anything.

Colin Rooke:

Yeah, essentially, even though inflation is cooling off, the real culprit here is high claims costs, storing repair and replacement costs and climate-related disasters. And particularly in Saskatchewan and Manitoba.

Paul Martin:

Yeah. Well, I mean even just the past few days talking about tornadoes, that seems early in the year for those kinds of conversations, but they’re now being cited and confirmed in Saskatchewan and Manitoba. So there’s the two provinces. Has the tornado alley come to play in this?

Colin Rooke:

Again, it’s all weather related disasters. And yeah, certainly there’s concerns for this year because I think this is one of the earliest years there’s been tornado warnings, and I was reading the articles around it that is this even, right? And so they’re factoring that in, but they’re also still recouping from weather related losses last year. And then of course, yeah, predicting this upcoming year. So quickly before the break, 200% increase in Q1 as an example in water related events, cold weather, climate related events, which is not helping here.

Paul Martin:

Alright, we’ve got to take a break. We’ll come back and explore those two numbers that you just put out there when we get back. You’re listening to Risky Business Commercial Insurance with Butler Byers, Paul Martin here, be back after this. Welcome back to Risky Business Commercial Insurance with Butler Byers. I’m Paul Martin, and joining me, Colin Rooke, the Commercial Risk Reduction Specialist with Butler Byers. Colin, before the break, you talked about the magnitude of claims on the personal side, the of weather related things and cold weather. I mean, we had some, they talk about January was the warm and all that sort of stuff, but sure didn’t feel warm to me. I mean, we had some pretty brutally cold days and I am guessing you don’t need too many hours of super cold weather before you start getting insurance claims.

Colin Rooke:

So again, we were discussing, okay, why are home insurance premiums trending up and why in particular Saskatchewan? And it comes down to a few factors, and one again is replacement cost to rebuild, and that’s a Canada wide problem, but that’s certainly being factored in across Canada. So you’d say, okay, well that might explain a lot of the average increases. However, specifically in our area, we’ve seen a staggering increase in the first quarter of cold weather related claims. So we’re talking burst pipes as an example. That’s not the only culprit, but to give some context as to what that could be. So we’ve got pipes freezing, flooding out the home, very costly to clean up on average just to repair a burst pipe. You look at about 16,000 in Canada. So again, that’s not helping the cause. And then kind of globally you look at, okay, again, what’s driving up rate? There’s a lot of concern across Canada and if any broker listening to this show, if you spend any time talking with a realtor, this comes up all the time, but we have a disproportionate amount of knob and tube wiring, 60 amp service and aluminum wiring. And so built into these increases are, I don’t really want to say penalties, but rate adjustments for these legacy issues or concerns. And then if you have a home with 60 amp service and knob and tube wiring as an example, and then you go to sell that home to a new buyer, any grandfathering of the policy gets eliminated and you either can’t get insurance, you can get good pricing if you fix it all, or if you can’t fix it or can’t address it and they will insure you, you’re going to see a sizable rate increase. So that’s a big issue for Saskatchewan as well.

Paul Martin:

I guess I’m surprised to hear that we have a disproportionate number of homes with those particular features. Does that surprise you when you encounter that data?

Colin Rooke:

Yeah, I mean maybe. I think, yeah, I guess I was surprised to see that you think, well, if you have a home built prior to the 1950s, it’s going to have knob and tube. But I guess my speculation would be that with sort of how with the large insurer that we have that has a lot of the home insurance market, if they’re able to grandfather this in, if you’re not being forced to change it, you’ve been with the insurer for a while and they’ve been very generous with sort of bylaws. If you haven’t been forced to change it and your electrician is saying, well, properly maintained your family is safe, then maybe just less of a likelihood that you would replace it. Like Saskatchewan has fewer home insurers than the rest of Canada in this market. And so it’s probably a function of that. I assume, again, if you’re not being forced to change it and you’re just sort of naturally addressing these problems by way of renovation, et cetera, then maybe they’re just not getting addressed as quickly as they should.

Paul Martin:

And so effectively, you’ve said to me here that we’re seeing some moderation on the commercial premium side, but on the residential or personal side that the trend line is upward, not like it is in commercial. We’ve got sort of divergent lines here.

Colin Rooke:

Yeah, so there’s no sign that home insurance premium as a whole are going to decrease. And it doesn’t appear that the rate increases year over year are softening. And I don’t really have, I mean, there’s things to look at. There’s certainly credits if you haven’t considered this, almost every insurer, if you consent to a soft credit check, there’s a lot of savings available there. And then just making sure if you’re moving homes, depending on what you’re buying, is it up to if you’re going from an older home to another older home, just know the risks, talk to your broker, walk them through. If you tell the broker after the fact what you bought, you’re sort of subject to whatever pricing structure is available to you. But if you’re hearing these topics and you’re thinking, does it impact me? Or again, I’m thinking of moving or I’m going to a newer home to an older home, just realize that if a lot of these policies could be grandfathered and you might be in a situation where you can’t find coverage or you can’t get coverage until a significant renovation has occurred. And again, this is on the minds of realtors all the time. It’s a familiar conversation that we’re having. I have a client and we looked at it, the previous owner was paying X, and now my client’s got to pay three times. What gives? And it’s typically these old bylaws, grandfathered bylaws that are no longer being accepted.

Paul Martin:

Interesting due diligence that I think probably most people don’t think about when they’re doing the notion of home buying. Listen, we’ve got a couple of minutes left before we wind up today. And I wanted to talk about a topic that you had indicated to me is it’s catching some attention. And that’s these new e-scooters that we see everywhere and they’ve really grown in popularity, and that’s kind of a grey zone for the insurance side of things.

Colin Rooke:

Speaking of things that people don’t think about, so really neat idea, right? You can open an app, jump on the scooters, zip around the city. However, from the insurance perspective, there’s a lot of grey, which when it comes to a claim you don’t like. So typically, and I’ll say typically because I don’t want to represent every policy there is, but e-scooters are not considered automobiles. And therefore, in the event of an accident, there’s no auto policy that’s going to come into play in the event the driver of the e-scooter hurts someone or something. So typically in an auto related accident, auto hits a pedestrian, the auto insurer is the piggy of the claim, but in this case, it’s not a registered automobile, and so no coverage. But the other problem is the e -scooter is not your property and it’s not part of the home insurance. So there is some coverage available, and again, depending on insurer, I don’t want to speak to all of them, but there’s coverage for e-bikes because e-bikes are just not a bicycle. And yes, they have some power to them and you can use them as a tool to help climb over obstacles. And so they are considered part of the home insurance policy unless they’re going over a certain speed. And again, I don’t want to talk about all cases, but being general, however, an e-scooter is not an e-bike and not used for climbing obstacles and giving you an extra push when you’re exhausted, it’s really a method of transportation. So just want to warn people that are one, using these on the sidewalk, I know you’re not supposed to, but people do, or on the road that there’s grey area for bodily injury that you might be in a position where you are being sued and you’re not protected by an auto fund, you’re not protected by your home insurance. And so if you’re in the habit of using scooters as your method of transportation, beware. Yeah, beware. Maybe you use Uber and you decide not to use Uber to get around. You want to use e-scooters because it’s more cost effective. Just speak to someone and make sure in the event that you cause some harm, that there is coverage or at least know the risk.

Paul Martin:

Colin that’s always very insightful stuff, and I think we are going to be talking about that one for a while to come. You’ve been listening to Colin Rooke, Commercial Risk Reduction Specialist with Butler Byers. This is Risky Business, I’m Paul Martin, thanks for joining us and we’ll talk to you next time.