Insurance industry must break ‘cycle of unsustainable claims’

Insurance industry must break ‘cycle of unsustainable claims’ | Insurance Business Canada

Claims

Insurance industry must break ‘cycle of unsustainable claims’

Few Canadians choose to repair and restore

The insurance industry must break a cycle of “unsustainable” claims practices to help bring down premiums and mitigate the impact of waste on the environment.

One claims head pointed to the financial burden of the escalating cost of claims on insurers over the past decade – a burden that ultimately falls on consumers, reflected in higher premiums.

“Looking at our industry’s impact on the environment, it’s clear that climate change has a cycle. If we contribute negatively to greenhouse gases, we worsen climate change, increasing the cost of insurance claims over time,” said Craig Bran (pictured), vice president of claims at Co-operators.

“In the 80s and 90s, catastrophic events in Canada cost around $400 million. This grew to $675 million between 2001 and 2010; from 2011 to 2020, it averaged $2.3 billion annually. In the last few years, we’re approaching $3 billion annually,” Bran told Insurance Business.

“These costs are passed on to consumers. We need to find ways to provide affordable and accessible insurance, and part of the solution involves sustainable practices.”

Co-operators survey reveals Canadians’ perception of claims waste

Part of the issue is that many Canadian policyholders aren’t aware of the option to repair and restore their insured assets, even though awareness of the growing waste problem has increased.

A key driver of this waste produced in Canada is the increasing occurrence of claims resulting from fires or floods. However, more than half of Canadians (61%) were unaware that damaged items from these claims go to landfills.

Other findings in the Co-operators survey show:

Only 23% know that repair or restoration is an option for insurance claims 
65% say they would prefer to repair items if they can be restored to their original condition  
19% who filed insurance claims in the last five years say they’ve been given the option to repair rather than replace 

“It was surprising to find how few Canadians knew about sustainable choices,” said Bran. “We need to do better as an industry to ensure our clients know these options are available to help break the cycle.”

What is needed to steer sustainable claims practices?

Bran said the start of real change happens at the moment of a claim. Brokers and advisors, as the primary point of contact in the claims process, have an important role in driving more sustainability in the insurance cycle.

“It starts with informing the client about their choices during the claim process. Many Canadians don’t think about claims until they need one, so we need to educate our clients better,” he said.

For insurers, offering repair and replacement options for claims and nurturing partnerships with vendors who can offer these services is crucial. 

“At Co-operators, we’ve ensured our vendors understand the available options and are equipped to service clients more resiliently. It starts with informing the client about their choices during the claim process,” Bran said.

“We have stringent requirements for the technologies our vendors use. It’s not just about cleaning soft contents; it’s about removing odors. For example, after a fire, our vendors can use ozone rooms to remove smoke smell from items, restoring them to a condition that’s often cleaner than when they were new.”

The gap in education about sustainability is another cycle that perpetuates bias in society that favours replacing things quickly. The insurance industry must help shift that mindset, according to Bran.

“There are two important elements here,” he said. “First, people have items damaged by insurance events that are meaningful to them, and we can clean and restore these important possessions. Second, repairing items often takes less time than replacing them, which is crucial when dealing with an insurance claim.”

When it comes to the impact of supply chain issues on claims, Bran said that while these challenges have increased repair times, this could be an opportunity rather than a barrier. New technologies being implemented can help mitigate these delays and improve the overall experience for clients.

“I think it was an opportunity to do things better and to reduce the amount of time that we were seeing in an increasing cycle time,” said Bran.

What are your thoughts on sustainable claims practices? Please share your comments below.

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