SUPPORTING THE INSURANCE INDUSTRY IN ORDER TO SUPPORT THE BUSINESS COMMUNITY (2023)

Issue

Recent news coverage has highlighted the issue of strata corporations struggling to get insurance for their buildings. However, similar challenges can exist for businesses who need commercial insurance before they can open their doors. 2020 is slated to be a “hard market” in the insurance sector, where premiums rise and the capacity for securing insurance declines. The provincial government needs to engage closely with the insurance sector to monitor the changing insurance market, to identify policy changes which could reduce costs and increase availability of insurance to businesses, to monitor and account for the impacts of climate change on the insurance sector, and to ensure a “hard market” does not cause undue or outsized negative economic impacts. 

Background

With an increase in the number and intensity of weather events and other disasters across the world, the insurance industry is being forced to make significantly more payouts for claims than in the past. Couple that with declining investment returns as interest rates retreat lower and the availability and affordability of insurance going forward can be negatively impacted.

In fact, in its “2019 Facts of the Property and Casualty Insurance Industry in Canada” report, the Insurance Bureau of Canada notes that the previous year saw the insurance sector face its “largest loss in a decade” as it “paid out more in claims and expenses than it received in premiums.”[1] This loss and the ongoing decline in net income in the insurance industry, has led to a “hard market” for insurance, which means customers of insurance, including businesses, will face higher premiums, a lack of insurance options, or even an inability to secure insurance at all.

While much attention has been paid to what his “hard market” means for residential consumers of insurance, the Chamber is concerned with the potential for negative impacts in the commercial insurance market. In 2020, commercial property insurance, commercial auto insurance, directors’ and officers’ liability insurance, and marine cargo insurance are expected to be the lines of insurance most impacted by the “hard market” according to the insurance industry. If businesses face increasing insurance costs, that will be a direct hit to their bottom-lines and their profitability. And if certain businesses or industry sectors are unable to find or afford insurance, they may be unable to conduct operations at all.

While it is not clear if the current challenges in the insurance market will abate, or if they will become a new persistent state, the provincial government should ensure that it is proactively engaging with the insurance industry to identify what, if anything, can be done to mitigate the impacts on the end insurance consumer, particularly businesses. In addition, as a major contributor to the headwinds facing the insurance sector is the ongoing impacts of climate change and the increase in frequency and severity of natural disasters and weather events, the provincial government should ensure it is considering the impacts on the insurance sector as it develops and implements its CleanBC plan and its new Climate Preparedness and Adaptation Strategy.

THE CHAMBER RECOMMENDS

That the Provincial Government:

1. Proactively engage with the insurance industry, the business community, and the BC Chamber of Commerce network to monitor the changing insurance market, with a goal of identifying regulatory changes which can address the “hard market” of rising costs and decreased insurance capacity should intervention be warranted.
2. Ensure it is monitoring the impacts of climate change on the insurance industry and include the effects on insurance as part of the province’s climate preparedness and adaptation strategy.