More Canadians seek insurance protection for Cat disasters

Extreme weather events affect one out of every five households, and Canada’s property and casualty insurance industry has an opportunity to close insurance protection gaps for financially vulnerable Canadians and communities, new research points out.

Commissioned by The Co-operators, a study by the Financial Resilience Society shows a “clear, strong correlation between having sufficient insurance coverage to protect against the unexpected (home, auto, and life) and improved financial resilience outcomes for Canadian households across every single household income demographic.”

The society’s index is based on an online survey conducted with 5,000 adult Canadians from a representative sample of the population by province, age, gender and household income.

The society calculates financial resilience based on Canadians’ answers to several questions, including about debt management, financial plans for unexpected costs, people available to provide support in case of financial hardship, self-reported credit scores, financial stress, and confidence in obtaining short-term financial goals, among others.

Overall, Canada’s mean financial resilience score is 52.23 as of October 2024, the report finds.

One-quarter of Canadian households were ‘financially resilient,’ meaning they could withstand financial shocks with little impact on their financial resilience. A further 28.8% were ‘approaching resilience,’ meaning they were building financial resilience in the absence of a financial shock.

Insurance protection gap

However, the percentage of Canadians who say they don’t have sufficient insurance coverage is growing at a time when Canada has seen its worst natural catastrophe season ever, the report says.

Fifty-three percent of households report they have sufficient insurance coverage to protect against the unexpected as of October 2024, slightly down from 2023.

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“Nearly half (47%) of households report they do not have sufficient insurance coverage to protect against the unexpected, with opportunities for more Canadian households to access insurance and ensure they have the appropriate level of insurance they need and are willing or able to pay for,” the report states.

“There are opportunities for the insurance industry to help more Canadians to access relevant and affordable insurance to help them protect against the unexpected, while recognizing that this has a proven and positive impact on their household financial resilience and their financial well-being, as evidenced through the Institute’s Index and this study.”

More seeking Cat coverage

As of late 2024, after four major natural disasters in Ontario, Quebec and Alberta during the summer caused record-setting damage losses of $8.5 billion in 2024, more Canadians were obtaining insurance coverage, the report finds.

“The proportion of Canadians that report they have taken out insurance to protect against the unexpected over the past 12 months specifically has increased from 12.2% of households in February 2023 to 15.2% of households in June 2024,” it says.

“The proportion of ‘Extremely Vulnerable’ and ‘Financially Vulnerable’ households that have taken out insurance over the past year has increased from 6% to 10% between February 2023 and June 2024, while the proportion of ‘Financially Vulnerable’ households that have taken out insurance has increased from 13% to 19% over the same period.”

Even so, there is more room for the P&C industry to inform Canadians about insurance solutions to help people and communities become more financially resilient if unexpected disasters occurr.

As of June 2024, 20% of households reported being affected by extreme weather events — extreme heat, floods or fires — over the past 12 to 24 months, the report states.

Against this backdrop, “7.6% of Canadians, up from 3% in February 2023, report being unable to access help to understand the financial implications of extreme weather events,” the report says.

“This indicates a growing need for targeted financial and insurance support for households affected by climate change, combined with opportunities for the insurance industry or other organizations to invest in digital or other communications or education to help more people understand the impact of climate change and associated risks for them, their families, assets or communities over time as appropriate.”

Feature image courtesy of iStock.com/Josie_Desmarais