Looking ahead, the pandemic is not the only challenge that Canadians and insurers should be worried about. The impacts of climate change continue to exacerbate, and unless insurers maintain dialogue with the governments, natural disasters will continue to cause both physical and economical damage that is difficult to recover from.
This week marks the second part of the Q&A feature, with the ex-leader talking about the importance of insurers engaging with governments, how the industry should further those engagements, and what he thinks the industry will be facing this year and beyond.
Having worked for Alberta’s Department of Environment and the National Research Council in Nova Scotia, how important do you feel it is that insurance engages with governments around tackling the impacts of climate change?
Without a doubt, the flood and climate files have been some of the most interesting challenges for me while serving at IBC. This is especially true in the past 15 years, where insurance claims from severe weather have more than quadrupled. The new normal for insured catastrophic losses in Canada has reached $2 billion annually, with water-related damage responsible for most of the losses.
On behalf of our members, we spent many years working behind the scenes to educate governments on the reality that floods are becoming more common, more dangerous, and more destructive. We told them plainly: Water is becoming the new fire.
As a result, more homes and more Canadians are at risk. Our advocacy was part of a broader effort to highlight the impact of our changing climate and the need for governments to take action to better defend Canadians with measures aimed at adapting to this new reality of risk.
I shared this story during my NICC address this year and I think it’s telling: several years ago, I had a meeting with a federal minister at a time where springtime waters were overflowing the banks of the Ottawa River just a few miles away. We laid out the facts and emphasized the potentially wide-ranging repercussions for our industry and our customers. But, it still felt like we and the minister were talking past each other.
It only clicked when we made it abundantly clear that the industry was willing to do its part to find and implement solutions that worked not only for us, but for taxpayers. Acting as a partner and a positive force – that is when we began to get traction. That is when we started making real progress on behalf of our members – and on behalf of Canadians.
Over the past year, the federal government has announced a national policy on climate adaptation and mitigation and launched a new plan aimed at reducing the impact of floods in the years ahead. This is huge for our industry – and for Canada.
Whether we consider the short- or long-term perspective, our industry is better served by being at the table. We are better served by playing a proactive and progressive role in trying to confront challenges that will affect our industry – and our country.
What are some of the key ways that insurance businesses can engage in these discussions further?
Governments have so many competing priorities these days. Whether it is addressing increasingly costly health care challenges, grappling with growing income inequality, or helping Canadians cope with sustained inflation, the list of issues is long and complex. It is difficult to get their attention on issues unless there is a crisis.
However, one of the approaches we have found to be successful is if you are able to illustrate to them how both consumers and governments benefit from what you are proposing. To be able to illustrate for them the win-win-win nature of your solution and that it is not just a handout to the insurance sector – this approach is proving successful. We are seeing that now on a number of files at the federal and provincial levels.
We are making progress. We are seeing some of our files advance because we’re able to show elected officials that this is not just about the insurance industry—we are a stakeholder—but it’s really about doing what’s right for consumers.
Today, IBC is playing a major role in flood policy and climate adaptation policy in Canada, which comes as a result of working collaboratively with stakeholders and governments. Together, our industry has emerged as one of the most influential voices in this important area. In doing so, we have begun to address the gaps in flood coverage for the benefit of Canadians.
What do you feel the oncoming year will bring for the Canadian insurance market?
A number of factors have combined to make this the most fluid risk environment facing insurers in a decade, if not more. We have very adept regulators here in Canada and they are attuned to these risks, with OSFI charting an ambitious course of new and updated oversight with the aim of becoming a global leader in prudential supervision. IBC has a strong working relationship with OSFI and will look to help address those risks.
At the same time, we’ll encourage the regulator to adopt a measured pace as it tackles its ambitious agenda, an approach that we believe will result in more thoughtful input from industry, and better outcomes for Canadians.
The pandemic and associated supply chain challenges have had an inflationary impact on the economy, producing major cost of living challenges for many. On the auto insurance file, there is the opportunity to present sensible cost-reducing reforms to governments in key jurisdictions, like Ontario, as a way to alleviate some of these cost pressures facing households.
Unfortunately, we can expect the next year to bring more natural disasters that will impact Canadians. The P&C insurance industry is a leader in the private sector’s fight against climate change and is committed to advancing solutions that safeguard the interests of Canadians. I’m hopeful for measurable progress on the flood file and on climate adaptation initiatives, more broadly. On a separate yet related note, 2023 could also be the year in which the broader sustainability and ESG movement take hold in Canada, and insurers are keen to continue this conversation with regulators.
We also can’t forget that while the industry is busy contemplating these complex topics, 2023 will involve some major system-level changes to how they do business. The most important among these is the implementation of new accounting standards under IFRS 17, which isn’t something that consumers will see, but will require a significant operational lift from insurers.
So while it’s clear that the next year will involve uncertainty, creating some risks, it’s important not to lose sight of the fact that risk brings opportunity. And the P&C insurance industry has always risen to the challenge.