Record $3.2 billion paid out during 2013 - Tough Year for the Insurance Industry

by IBO | 20 Jan 2014

The December 2013 ice storm that smashed through southern Ontario and the Maritimes heaped another $200 million in insured losses onto an already record-breaking year for natural disaster losses.

The year-end severe weather insured loss total of $3.2 billion is the highest in Canadian history, according to the Insurance Bureau of Canada, and more than triple the recent annual average.

"In 2013, the terrible effects of the new weather extremes hit Canadians hard,” says Don Forgeron, President and CEO, IBC. “From the Alberta floods last summer to the ice storms in Ontario and Atlantic Canada over the holidays, frankly, bad weather hit insurers hard, too.”

The losses of 2013 came after four years in a row of natural disaster losses for the insurance industry that hit the $1 billion mark.

In the December ice storms that hit southern Ontario and eastern Canada, most of the $200 million in claims were for homes damaged by trees that fell as a result of ice buildup. Ontario-based insurers also paid more than $25 million in claims for vehicles damaged in the storm.

"I'm very proud of how the home, car and business insurance industry performed during these difficult times. We responded quickly to disasters when Canadians needed us most,” says Forgeron. “Despite unprecedented losses, we were there for Canadians through each and every high-cost disaster. And we are contributing new ideas and leadership for adapting to severe weather in the future.”

The largest insured disaster – and Canada's costliest natural disaster ever – was the torrential rainfall that flooded towns in southern Alberta last June.

Insured damage for that storm was more than $1.74 billion, with rebuilding efforts expected to continue for many months to come.

“These unprecedented losses have been very difficult for Albertans. Many homes and businesses were destroyed,” says Bill Adams, vice president of the western and pacific region for IBC. “Rebuilding will go on for some time to come, and our industry will continue to be there to fulfill its important role.”

Ontario’s most expensive insured natural disaster in history occurred in July, when record rainfall soaked Toronto resulting in $940 million in damages.

Other natural disasters in 2013 included the severe thunderstorm that hit central and southern Ontario and southwest Quebec in July causing around $200 million in damage and the band of powerful thunderstorms that hit Quebec and Ontario in June with damage amounting to over $50 million.

“Canadian communities are seeing more severe weather, especially more intense rainfall. This overburdens our sewer and stormwater infrastructure, resulting in more sewer backups in homes and businesses,” says Forgeron. “Property and casualty insurers are collaborating with all three levels of government to help Canadians adapt to these new weather realities.”

For more data from PCS-Canada on insured losses in Canada, click here.

Most U.S. consumers who chose direct insurance option later returned to independent agents: poll

Value was cited as the reason that almost 60% of surveyed consumers in the United States who purchased insurance through a direct channel 10 or more years ago reported switching back to an independent agent.

A study commissioned by The Hanover Insurance Group Inc., a property and casualty insurer based in Worcester, Mass., shows that most respondents who switched to direct insurers – promises of lower prices was a key motivator – later returned to an independent agent.

Conducted by InsightExpress, the study included input from 1,000 consumers who purchased insurance through direct channels 10 or more years ago.

Most consumers who switched back to independent agents cited expertise and convenience as drivers in their decision, notes a statement from The Hanover. Among other things, respondents also cited the benefits of having one point of contact to handle insurance needs and questions, the statement adds.

“The majority of respondents said their number one reason for switching from a direct insurance provider was to have someone to guide them through their insurance-buying decisions,” says Mark Desrochers, president of personal lines insurance at The Hanover.

“The study shows that consumers realize the value that independent agents bring. That’s why we deliver our products exclusively through agents,” adds Dick Lavey, president of field operations and chief marketing officer at The Hanover.

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DAILY NEWS Aug 8, 2013 10:59 AM

Payback to insurer

Roger Herrin learned that a court had ordered him to repay $500,000 he had received in insurance payments for the death of his son. Upset about the decision, he repaid $150,000 of the insurance funds – one-quarter of the court award – in quarters.

Herrin's 15-year-old son, Michael, was killed in a car accident in 2001, as reported on gawker.com. Michael was the only one of the four passengers in the car who died, so Herrin received the bulk of the $800,000 settlement from the car's insurance. He also received $1.65 million in other insurance payments as a result of his son's death.

The other crash victims and their families contested the ruling. The appeal court required Herrin refund his share to increase the other families' take. (continued.)

Herrin delivered 7,500 pounds of quarters, packed in 50-pound, transparent bags, to attorneys representing the other families on a flatbed truck and in an armored truck. They were transported from the Federal Reserve in St. Louis.

The attorneys weren’t thrilled about receiving the insurance proceeds in coins. They were suddenly in possession of $150,000 with no secure way to store the money, and no immediate means to transport the 150 bags to the bank.

“Advance notice would have been nice, because we could have made arrangements to have it delivered to the bank,” one of the lawyers told Gawker.

Herrin’s only regret was that he couldn’t make the delivery in pennies instead.

By: insurancebusiness.ca | 06/08/2013

FSCO alerts public to insurance scams

Sentel Insurance and LinkXInsurance are not licensed to do business in Ontario

July 30, 2013

The Financial Services Commission of Ontario (FSCO) is warning consumers that Sentel Insurance is not licensed to do insurance business in Ontario.

FSCO has been informed that a company or individual identifying themselves as “Sentel Insurance” has been placing phone calls to Royal Bank of Canada (RBC) clients. The calls come from the phone number 587-880-4306, and ask for the recipient’s personal information for the purposes of offering identity theft protection insurance on behalf of RBC.

Consumers should exercise caution if they are contacted by anyone from these coordinates. FSCO has confirmed with RBC that Sentel Insurance does not appear to be selling a valid product, and is not a valid insurance agency associated with RBC.

FSCO has also issued a warning alerting consumers that an individual called “Jermaine” is claiming to sell auto insurance on behalf of LinkXInsurance. The individual is using the following email address, website and phone number: linkxinsurance@gmail.com, “www.LinkXInsurance.com”, 647-830-8421.

This individual sold false insurance cards that listed Aviva Insurance Company and PC Financial Insurance Brokers as their insurers. LinkXInsurance and this individual are not licensed to do insurance business in Ontario.

It should be noted that Aviva Insurance Company of Canada is an insurance company that is licensed by FSCO, and PC Financial Insurance Brokers is an insurance brokerage that is licensed by the Registered Insurance Brokers of Ontario (RIBO). The companies have confirmed that they are not affiliated or associated with LinkXInsurance, this individual or this scam.

If consumers purchase insurance from brokers or insurers that are not licensed in the province, they are not protected under the Insurance Act and the regulations that govern Ontario’s licensed insurance companies and agents.

FSCO’s website contains a list of all insurance companies and brokers licensed to do business in Ontario.

State Farm's lightning-related claims cost more than $200 million last year

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2013-06-26

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With the start of peak lightning season, State Farm calls lightning one of nature’s most underestimated dangers, reporting that it paid more than $200 million in related insurance claims across North America last year.


Citing data compiled by Environment Canada, State Farm Canada notes in a statement that the country receives an annual average of 2.4 million lightning strikes, killing 10 people, injuring 164 – more than 94% of related deaths and 74% of injuries reported since 1986 have occurred between June and August – and igniting 4,000 forest fires that result in hundreds of millions of dollars in property damage.


State Farm paid more than $200 million in lightning-related insurance claims across North America in 2012, with the average claim being about $6,400. In Canada, the 131 lightning claims received cost approximately $1.3 million.

The Insurance Information Institute (III), based in New York, reports an analysis of homeowners insurance data in the United States by III and State Farm found there were 151,000 insurer-paid lightning claims in 2012, down almost 19% from 2011. The average lightning paid-claim of about $6,400 last year, however, was up 25% from 2011, the institute notes in a statement, issued in recognition of Lightning Safety Awareness Week, which runs from June 23-29.
“Taken together, these two factors resulted in $969 million in total paid lightning claims, up 1.7% from 2011,” the III statement adds.

In the U.S., State Farm reports the top five states ranked by the number of lightning claims paid by the insurer are as follows: Georgia with 3,844 claims costing approximately $21.5 million; Louisiana with 1,989 claims costing about $9.1 million; Texas with 1,825 claims costing around $17.7 million; Alabama with 1,713 claims costing about $11.5 million and Tennessee with 1,591 claims costing approximately $12.5 million.

State Farm Canada points out that as the number of electronics in homes and businesses rises, so does the risk of damage. “Plasma and high-definition television sets, home entertainment centres, multiple computers, smartphones, gaming systems and other expensive devices continue to have a significant impact on the number of claims,” notes the insurer.

“The average cost per claim continues to rise, in part because of the huge increase in the number and value of consumer electronics in homes,” Loretta Worters, vice president of the III, says in the III statement.

A whole-house surge protector is the best starting point for reducing the risk of damage or fire, State Farm Canada recommends. Localized surge protection for power cords to important or expensive electronic equipment and any telephone and cable/satellite TV lines connecting to that equipment can enhance protection.

While indoors, State Farm Canada advises disconnecting electrical appliances, including radios and television sets, before a storm and not touching them during a storm. In addition, do not handle electrical equipment or telephones since the electrical current from the lightning strike will travel through wires and cords.

III reports that the incidence of lightning claims in the U.S. in 2012 continued its downward trend. Paid lightning claims from 2004 to 2012 dropped 46%, a decline that may be attributed to increased use of lightning protection systems. Despite the drop, the average cost per claim rose 142% over the same timeframe.

The III suggests that investment in a lightning protection system will help protect property, belongings and equipment. Lightning protection systems are designed to provide a specified path to harness and safely ground the super-charged current of the lightning bolt. The system receives the strike and routes it harmlessly into the earth, thus discharging the dangerous electrical event.
Damage caused by lightning, such as fire, is covered by standard homeowners and business insurance policies, while some home and business policies provide coverage for power surges that are the direct result of a lightning strike, the institute adds.

An Environment Canada weather summary, issued at 4:46 am Wednesday, notes that for the third time in less than a week, thunderstorms have brought locally heavy rainfall over southwestern Manitoba resulting in further flooding problems in some areas.

“The storms moved east across southern Manitoba, including Winnipeg and the Red River Valley Tuesday night, bringing locally heavy rain, strong wind gusts up to 100 km/h and frequent lightning,” the statement adds.

Weather damage: Most Canadians don’t know what’s covered

New poll commissioned by IBC reveals Canadians' lack of coverage awareness

May 31, 2013
citopbroker.com

Many Canadians are unaware of what weather damage is covered by their home insurance policies.

A new national poll conducted by Pollara found that only 36% of Canadians know that water damage due to overland flooding is not covered by home insurance. Perhaps more surprisingly, only 10% know that sewer back-up damage may or may not be covered, depending on the policy. Fully 57% believe that this damage is covered by all home insurance policies.

Insurance Bureau of Canada (IBC) released the results of the poll today in Vancouver at the opening of the Federation of Canadian Municipalities (FCM) Annual Conference.

The poll, which was commissioned by the IBC, also reveals Canadians’ attitudes toward severe weather preparation.

The poll found that the majority of Canadians are not actively preparing for the possibility of bad weather despite an increase in its frequency and severity. Survey respondents, however, were somewhat more positive about their own personal preparations than they were of Canadians in general.

Only 8% of respondents believe Canadians in general are very actively preparing for severe weather. Similar numbers say this about the people in their province (9%) and in their communities (12%). Nonetheless, 22% say that members of their own households have been preparing very actively.
“The insurance industry is on the front lines when disaster strikes so we would like to see these numbers improve,” said Don Forgeron, IBC president & CEO, in a press release.

“We are very aware of the costly and devastating impact of severe weather,” he added, saying that preparation and adaptation are key to reducing losses.  “Insured losses as a result of severe weather have been above or near $1 billion in each of the past four years, but there is no way to measure these huge losses in human terms. Homes flooded, cars smashed, trees uprooted, roads washed out and businesses interrupted all take a toll on the lives of those affected,” Forgeron said.

Some of the other findings of the Pollara research include:

• One half of respondents believe that some damage to their homes due to severe weather is likely to happen in the next 10 to 15 years.
• Almost three quarters are confident that their municipal sewer systems will be able to handle the amount of water produced by storms in the next decade.

Overall, Canadians do not have good awareness of which weather damage is covered and which isn’t covered by home insurance policies. Many answer specific questions incorrectly and significant numbers can offer no opinion at all.
The poll found that:

• A small majority (53%) know that home insurance covers hail damage to roofs
  
• Only 46% know that home insurance generally covers damage caused by a tree destroying their roof as a result of a tornado.
  
• Less than one half (46%) know that damage from landslides and snowslides is not covered.
  
• Less than one half (45%) know that damage from tornadoes (aside from overland flooding) is typically covered by home insurance.
  
• Only 39% know that home insurance does not cover windstorm damage to trees.
  
• Only 9% know that coverage for roof collapses due to snow and ice accumulation depends on the policy. Forty-nine percent believe this damage is typically covered.
  
• Only 7% know that some “acts of God” (natural events that are not preventable) are covered by home insurance while some are not. Forty-four percent believe these events are covered and 35% believe they are not.
  
• Virtually no one realizes “acts of God” is not a term contained in their policies.

The top 10 costliest tornado's in history

The cost of a massive tornado that battered an Oklahoma City suburb could be more than $2 billion, according to a preliminary estimate announced Wednesday by state officials.

We continue to see increased natural disasters across North America. Although we generally see tornadoes in the Southern states we have seen some turbulent weather even in Ontario. Last Wednesday there was a confirmed F2 tornado that touched down outside of Lindsay, Ontario.

Thankfully we haven't had to deal with a disaster of this magnitude in Ontario and hope we never have to. I found a list outlining the most expensive tornado's in history. This recent Oklahoma tornado if estimates are accurate would put it in the top 3!

Rank      Date                           Location                          Cost (2013 USD)

1              May 22, 2011          Joplin, MO                       2.9 billion

2              April 27, 2011         Tuscaloosa, AL                2.3 billion

3              June 8, 1966            Topeka, KS                      1.8 billion

4              May 11, 1970           Lubbock, TX                   1.5 billion

5              May 3, 1999             Oklahoma City, OK        1.4 billion

6              April 3, 1974             Xenia, OH                      1.2 billion

7              May 6, 1975              Omaha, NE                     1.1 billion

8              April 10, 1979           Wichita Falls, TX           890 million

9              June 3, 1980              Grand Island, NE            805 million

10            October 3, 1979        Windsor Locks, CT         800 million