The insurance industry is changing. Government intervention, worsening weather conditions, and new technologies are introducing a multitude of unprecedented new plays into the game. We sat down with Sean Graham, Principal Broker at KTX Insurance Brokers, to learn more about what you can expect from insurance in 2015.
1. Ontario's Auto Insurance Reforms to Hit Target
In 2013, the Liberal government introduced a plan to reduce auto insurance rates in Ontario by 15 per cent by August 2015. Ontario has the highest auto insurance rates in the country, in part due to the unparalleled levels of fraud committed in the province.
"[The Liberal Government is] saying they are going to reach their goal and from what I'm hearing it is going to happen," Graham says. But it's hardly the only factor at stake. Part of the equation, he explains, is the introduction of Bill 15 regulating tow truck drivers and healthcare practitioners. This will help reduce fraud and is theoretically where the rate decreases will come from. In order to reduce premiums you have to reduce the costs.
"What that means is big rate decreases for consumers, and regulation for towing and healthcare practitioners," Graham says. "It really affects everyone in the insurance industry and anyone who pays auto insurance in Ontario."
2. Severe Weather Patterns to Impact Insurance Coverage Options Nationally
Graham calls the crisis, "Water, water, water."
Thanks to climate change, our weather conditions are worse than ever. From flooding across the country to ice storms and mass power outages, the weather is wrecking havoc on homeowners-and home insurance companies. Insurance companies have had to act in unprecedented ways, and as a result they've had to re-evaluate their coverage options.
"The trend that I've been seeing is just about every insurance company out there is changing the way that they cover people for water damage. What they're really doing is taking coverage away," Graham says. "Most insurance companies are restricting water coverage just at the time when we're getting the most water damage. It's because the insurance industry can't sustain paying for all these water losses without raising the rates."
Tips To Protect Yourself From Water Damage
Graham says that if insurance companies are taking coverage away, then "you need to self-insure, you need to take care of your own risk." He has two main recommendations:
- Install a sump pump. If water gets into your basement and starts rising, the sump pump will pump everything back out automatically. Even better, have it hooked up to a backup generator so that it will work even in the event of a power outage.
- Install a backflow valve. This allows water to drain out of your house but not come back in.
- Say "no" to man caves. Basements use to be largely unfinished, but "now you've got furniture, couches, pool tables, games rooms, video games, DJ booths, everyone is investing so much into their basement. If you want to manage your risk and you're in a high flood area, you might not want to put your most expensive goods in your basement. At the very least you should keep them elevated off the floor.
3. Cyber Risk Coverage to Increase For Businesses & Individuals Alike
"Companies are getting hacked constantly and most of them are either uninsured, or underinsured when they have privacy breaches," Graham says. "All it takes is one hack and for their clients to launch a class action lawsuit and if they don't have insurance for that they're in trouble."
Graham says more and more businesses are catching on and obtaining cyber liability coverage as part of their commercial insurance as they realize the potential threat that comes with getting hacked, something that not even big names like Sony and Apple are protected from.
"The flipside is on the personal side. People like you and me, is our information protected adequately on our home PCs, on our laptops, on our tablets? We've got our information all over the place and so many people have access to it at any given point in time. We need to cover ourselves with things like identity theft coverage," Graham says.
"There are companies that offer identity theft coverage and maybe it's something people should look into if they're like most people and their personal data is not all that protected. I think everybody knows that privacy is becoming more and more of an issue, but not many people think they can protect themselves with an insurance product."
4. All Providers to Adopt Usage-Based Insurance Programs Within Next Two Years
Usage-based insurance, also known as telematics, will continue to be a big trend in 2015. "I think almost every major insurance company is going to have within the next year or two, some sort of product rolled out giving consumers an option for telematics in their vehicles."
Graham says most companies already have a strategy, and many will roll something out this year. A recent KANETIX.ca study found most Canadians are unfamiliar with usage-based insurance, a finding that supports its low adoption rate.
"Consumers are going to have plenty of options available for when they come around to the idea that telematics could be a good thing for them," Graham says. "The industry is out ahead of that trend, so there is going to be plenty of products for when the demand is there."
5. Insurance Fraud Crackdowns To Increase
Late last year, a woman was charged with fraud for claiming she was driving her vehicle at the time of a collision when in fact it was her daughter driving. Her insurance company, Aviva, found out and after an investigation Hamilton police pressed charges.
"Insurance companies are more and more going after fraud," Graham says. "I think it's an indicator that the industry really wants to get tough and crack down."
Graham says people commit fraud, sometimes unintentionally, all the time and insurance companies have noticed. An increasing number of prosecutions are expected to take place in 2015.
"People might think innocent things like saying this person was driving instead of me, or not disclosing their kids on their insurance policy, that stuff happens all the time, but that's all fraud. What happens is other people end up paying for that. It raises the cost of insurance for all of us."