Lucan Biddulph learns about rising insurance costs
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Like municipalities across the country, Lucan Biddulph can expect a significant upcoming increase in its municipal insurance costs.
That was one of the takeaways from a July 13 presentation at the Lucan Biddulph council meeting by regional manager Tony Commisso of Intact Public Entities.
Commisso said his main reason for speaking to council was concern over escalating insurance costs.
“Municipalities across Ontario and other parts of Canada are seeing their annual insurance costs skyrocket,” he said.
Commisso said he believes there are two prime reasons for the increases, the first being the cyclical nature of the insurance business. Commisso said we are now in what he described as a “hard insurance market,” which is a period during which insurance markets become strict regarding the business they underwrite, how much they underwrite, and how much coverage they’ll provide. These hard markets have happened a few times since the early 1970s and typically last three or four years and are followed by a soft market when things balance out. Commisso said an unusually long soft market just ended in 2019.
Another reason for increasing costs is the fact that the cost of claims is escalating. Commisso said society has become much more litigious and the dollar value of court awards is rising.
Other factors for increasing insurance costs are climate change, cyber liability, class actions, transit claims and more.
“Climate change has resulted in a substantial increase in property losses and catastrophic losses,” Commisso said. “Insurers have statistically seen more weather related losses than ever before.”
Low interest rates on insurance companies’ investments are another factor, Commisso said.
He told councillors they can expect a double digit percentage increase in their municipal insurance costs. The current average in Ontario is an 18 per cent increase, according to Commisso.
“I think Lucan Biddulph can expect anywhere between 15 to 25 per cent,” he said of the potential increase. He said he doesn’t know the final figures yet, but the municipality’s renewal will take place in September.
Commisso said Lucan Biddulph’s insurance claims activity have increased for five straight years, which he said is consistent with what many other municipalities in Ontario are seeing.
To try to offset some of these increases, Commisso said risk management is the key for municipalities. He said preventing claims will have an immediate impact.
“If you can prevent an insurance claim from happening, you’re only going to help yourself in the long run.”
Commisso said, “It’s been over 20 years since the insurance industry has really inflated their rates like this. The last time this happened was in the early 2000s.”
Increasing deductibles is one way to save money, but Commisso described that as “short-term thinking.”
Of the insurance cost increase Lucan Biddulph faces, Coun. Daniel Regan said he couldn’t imagine going to taxpayers and telling them there would be a 25 per cent increase in their taxes. He asked why there was such a long period of no big increases in insurance premiums while now they’re suddenly increasing 18-25 per cent. He also wondered what the common claims are.
Regarding the long time period of no big increases in insurance costs followed by a sudden increase, Commisso said the market is hard to predict. He also said in the last 10 years there “was this huge uptick in property loss claims.”
The Fort McMurray wildfire in 2016, for example, resulted in the biggest insurance claim in Canadian history, Commisso said.
He said insurance companies have been playing catchup, and weather related losses over the years have “pushed them over the brink.”
As for the types of claims being seen, Commisso said municipalities see liability claims like slips and falls on municipal property as well as road accidents.
While Lucan Biddulph’s costs will increase, Commisso assured councillors that the municipality’s core insurance coverage is remaining intact.
“We’re not slashing what we’re covering or how much we’re covering for. We’re not increasing your deductibles,” he said.
Commisso admitted it’s a frustrating time, but he said it is temporary.
“I hope this is the second year of a three-year cycle where we’re going to see these challenging rates, and then everything will balance out, things will calm down.”
Asked by Mayor Cathy Burghardt-Jesson if he ever sees a time when rates go back down, Commisso said he does.
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