Canada’s insurers share a commitment to protecting Canadians – and being there for them in moments of challenge and crisis.
As part of that commitment, insurers must be attuned and responsive to changing times and evolving risks.
The past year has highlighted a number of forces that are affecting and reshaping Canada’s insurance industry. Foremost among them is our changing climate – and dangerous weather events that are growing in frequency and severity.
A Changing Climate Brings New Risk
During 2023, more than 5,000 forest fires burned across our country. Millions of hectares were lost – a record summer in all the worst ways. Floods and heat waves have become seasonal perils. With more and bigger fires and floods, we’re seeing more threats to life and higher costs related to recovery.
With each new hardship, there are moments of heartbreak – lives and property lost, families uprooted, communities changed forever. This is our new normal. Government, industry, and Canadians have a responsibility to adapt.
More than a decade ago, Canada’s insurers made the choice to be proactive. We developed new flood insurance products to help protect Canadian families. And we began advocating to government – calling for policy changes that would respond to this new era of risk.
Early in 2023, in response to our advocacy, the federal government announced the creation of a national flood insurance program. This new government-backed program will help ensure that all homeowners – regardless of where they live, regardless of risk exposure – have access to affordable flood insurance. And we’re pushing hard as an industry to help the government get the program up and running as quickly as possible.
Bill Blair, the Emergency Preparedness Minister at the time of the program’s announcement, made a point of highlighting the contributions of the insurance industry. He said that government sees insurers as partners in protection. We see ourselves the same way.
That’s why, in the same spirit, Canada’s insurers are also working with government to find solutions on earthquake insurance.
The threat of a serious earthquake exists in regions across our country. Yet few homeowners in eastern Canada are adequately insured against the risk. And in the west, insurance alone can’t be expected to manage the costs of a significant seismic event. By working together, government and the insurance industry can develop a solution that financially protects both Canadians and the federal treasury – and offers affordable insurance to those at greatest risk.
Government Intervention and the Cost to Consumers
Another force affecting the lives of Canadians – and reshaping our industry – is a trend toward increased government intervention and regulation.
In Alberta, for instance, the provincial government has put in place a cap on auto insurance rates. This may sound like a welcome development for drivers – but in fact it serves to exacerbate existing challenges within the system and potentially reduce competition in the marketplace. Already, one insurer has left the Alberta market, leaving 16,000 drivers searching for a new provider.
Simply put, rate caps on auto insurance don’t help drivers over the long term. We’ve seen that clearly in California, where drivers have been dealing with the fallout of well-intentioned but damaging government intervention. For many, it’s getting harder to find insurance.
It’s important to understand the factors that influence the cost of insurance. Across our country, there are growing cost pressures due to an epidemic of car theft and an increase in legal and repair costs. Last year marked the first time that Canada’s insurers paid more than $1 billion in claims for stolen vehicles. That’s triple what they paid out in 2018. And, in Alberta, legal costs alone have soared more than 30 per cent in the past five years. The government is capping rate increases in a world where costs are soaring. It’s simply not sustainable.
We recognize that this is a stressful time for many Canadians as inflation and costs remain high. But the path to greater affordability in auto insurance lies in genuine reform – in increasing choice for consumers and allowing insurers to compete on price. To that end, Canada’s insurers have put forward a proposed reform package that would lower auto insurance premiums in Alberta by up to $325 a year. It would give drivers more choice in their coverage options, including the ability to waive a cash settlement for pain and suffering following a minor injury – all while doubling the amount of pre-approved treatment and care provided to those injured in collisions.
This proposal is based on an effective real-world model. Drivers in New Jersey have seen stable rates since similar reforms were introduced there more than 20 years ago.
It’s also worth noting that Canada’s insurers operate today in an environment of growing regulation. This is important because excessive regulation can increase costs and stifle ingenuity. Canadians benefit when each of the country’s private insurers is actively fighting to capture new business – and actively working to develop the best products and services. When companies are allowed to compete, consumers win.
Canada’s insurers believe that regulations should exist to protect people from risk – not from progress or competition. All regulated companies need a stable, predictable, reasonable regulatory environment so they can grow, innovate, and better serve their customers.
Simply put, it’s counterproductive to try to grow an economy and create jobs by putting more of a burden on those who help power the economy and the job market.
Technology and the Changes to Come
There’s another force at work that is beginning to have an influence on the insurance industry and those who rely on it. Technological progress – everything from increasingly autonomous cars to the dawn of Artificial Intelligence (AI) – will usher in a transformation in how we drive and, potentially, how we live.
Both advances will bring opportunity and challenge. Although a truly self-driving car for family use remains a long-term project, improvements in semi-autonomous systems hold the potential to reduce accidents and costs to the system. At the same time, there will be issues to be resolved related to liability and responsibility.
When it comes to AI, there is the potential for greater efficiency in how the insurance industry performs routine tasks and prices products. But there are also genuine concerns about the impact on privacy and the use of data. Some extreme voices want to ban AI. A more sensible approach would prioritize the responsible use of this new tool.
The year ahead – and the years beyond – will herald new progress on the technological front. Canada’s insurers will adapt to reflect the changing landscape and to meet the shifting needs of our customers.
A Legacy of Protection
Canada’s insurers play a critical role in protecting people and property, being there for Canadians, helping them get back on their feet.
I know this from my own experience.
When I was a girl growing up in St. John’s, a fire broke out in our little house just before New Year’s. My Mom and Dad were home at the time and got out okay. But our kitchen was burned black and the rest of the house suffered serious smoke damage.
I can remember my parents’ sense of anxiety. We had little to no savings at that time. What would happen to us? The insurance company found us a hotel. They organized and paid for repairs. They even made sure my brother and I had our few Christmas gifts.
They were there for us in our worst moment.
Times may change. Technology may advance. But, Canada’s insurers will continue to be there for people across our country in times of challenge – and in the actions we take to help protect Canadians from the threats of today and tomorrow.
