COVER STORY
Brokers in Action point, you can’t force an insurance company to lose money, so that’s why we are worried about availability of coverage.” Auto is also an issue in Saskatchewan, but for a different reason. The Insurance Brokers Association of Saskatchewan (IBAS) is currently involved in negotiations with Crown corporation Saskatchewan Government Insurance (SGI) over the terms of SGI’s contract with brokers, says IBAS president Dave Nussbaumer. All vehicle owners buying Saskatchewan plates must purchase basic liability and injury coverage from the Auto Fund, written by SGI. Consumers are free to buy additional coverage — such as extra liability, collision or comprehensive — from SGI or the private sector. Brokers can choose whatever companies are “best for the customer, and that’s where competition becomes an issue,” Nussbaumer suggests. In Saskatchewan, brokers have contracts to market SGI products and renew and service existing SGI policies. SGI’s broker contract “has everything to do with our remuneration, our terms, services, how they deal with customers via the Internet, what channels the customers link to SGI, whether (brokers) are involved or not,” he says. IBAS is in negotiations with SGI over a draft contract update, he points out. Nussbaumer reports SGI recently sent a draft copy of the contract to brokers. “Some of the bigger issues are the (draft) contract is better suited to an agent business model versus a broker business model and we are brokers,” he says. “Someone who walks through my door, writes me a cheque to find an insurance product for them — I consider to be my customer.” Saskatchewan’s brokers need SGI, acknowledges Nussbaumer. “We get that. But now we feel we are maybe being forced into a contract situation that is not in the best interest of us as business owners,” he emphasizes.
EARTHQUAKE EXPOSURE British Columbia also has a governmentowned auto insurer, but earthquake risk is more of an issue in that province, 38 Canadian Underwriter April 2015
says Kevin McIntyre, president of the Insurance Brokers Association of British Columbia (IBABC). “Earthquake is the biggest issue that we deal with on an ongoing basis, and it’s certainly one that I’m passionate about,” McIntyre says. “We have half of condominium owners not buying any insurance at all and lots of people who don’t carry earthquake coverage.” Still, he notes some condo complexes “have massive earthquake deductibles”
“We are for lower (auto) rates, as long as they could be achieved responsibly. At some point you can’t force an insurance company to lose money, so that’s why we are worried about availability of coverage,” argues the Insurance Brokers Association of Ontario’s Michael Brattman. and brokers need to advise those clients on the risk. “If you have a $40 million complex that you are part of that’s got a 10% deductible, that is a $4 million deductible in the event of an earthquake,” McIntyre points out. “Individuals living in them will be called upon to kick in their share, which might be tens to hundreds of thousands of dollars. We need to get more and more
of those people to understand insurance and earthquake insurance better and be better prepared for it,” he emphasizes. Condominiums are also an issue for brokers in Quebec, Gaudreau explains, noting that water damage claims are increasing. “Loss ratios are really, really bad with condo associations,” he suggests, adding that water damage claims associated with condensation in walls are covered by the association’s policies. Deductibles are increasing and, in some cases, premiums are increasing by as much as 30%, even for associations without claims, Gaudreau reports. “We are setting up a task force and a committee to discuss some potential solutions,” he says, reporting that RCCAQ plans to work with condominium associations and insurers in the province “to try to evaluate some potential solutions to this problem.”
EXTERNAL PRESSURES Beyond specific perils, there are broader issues that can affect insurance brokers regardless of province. For example, one the biggest issues for the Insurance Brokers Association of Manitoba (IBAM) is low interest rates because insurers need to rely more on underwriting income to make money, says Dave Schioler, chief executive officer of IBAM. “Profits have to come from underwriting performance... so that becomes the key,” he says. “Brokers have to continue to provide the kinds of professional service that people expect,” he adds. Schioler reports competition from direct writers is also an issue, suggesting that large insurance companies selling through brokers “have to work hard to become household brands.” Although Manitoba has a compulsory auto insurance coverage product provided by the Crown corporation, Manitoba Public Insurance, Schioler says brokers can compete by providing advice to auto customers on all of the options that are available beyond basic Autopac coverage. “When a broker’s there and talks to the client about what their needs are and what products are available” — such