Optionality in personal lines is in vogue right now. And although that poses a challenge for brokers advising their clients in home and auto insurance, it also puts a premium on broker advice to their clients, which is healthy for the future of the broker channel, brokers heard at IBAOcon 2024 in Toronto Thursday.
Discussions about optionality in auto insurance dominated the convention Wednesday, as brokers expressed concerns about a draft proposal by the provincial government to make almost all of Statutory Accident Benefits (SABS), save for medical/rehab benefits, optional. This is part of the government’s plan to reduce auto insurance premiums for Ontarians.
Panellists at a presentation about personal lines at the Insurance Brokers Association (IBAO) Thursday expressed concerns about making most of auto accident benefits optional, and what that might mean for consumers.
“I stress first that the [auto] reform discussions that are out there are draft,” said Enrico Mastrangeli, vice president of distribution and member innovation for The Commonwell Mutual. “I would hope and expect that there will be some changes from that draft.
“If you’re looking to accomplish choice, I would say for sure the draft regulations…achieve that. I’m not going to get into details [about] the regulatory changes, but the medical rehab coverage under accident benefits would be the only mandatory coverage. The remaining accident benefit coverage will be consumer choice, and that creates some instant concern for me.”
This same optionality is making its way into the personal property side, said Laura Homanchuk, director of personal lines P&L performance at Gore Mutual.
“I know we’ve had a few conversations [about optionality] around the auto side of it [so] I’ll skip to a little bit of the property side,” she said. “We see a lot of requests for optionality. Consumers don’t want an ‘everything fits inside a box’ product. They want to have something that adapts to them, because everyone is unique. And they want their policies to be unique along with them.
“So, I think we’re going to see the industry moving towards making more of a basic policy to handle the economic challenges that some people are having, with the ability to add in. It balances the claims challenges, from a loss cost perspective, but gives consumers the choice over what they want to buy. In that regard, [consumer] education [by brokers] who are in this room is very important.”
Related: Ontario proposing end to most mandatory accident benefits, and brokers are concerned
In property, there has already been a move to offer overland flood coverage by way of an optional endorsement. This would supplement sewer backup that is already part of the basic home insurance policy. This optionality became widely available after 2015, two years after a flood caused $3.5 billion of insured water damage in Calgary and southern Alberta.
“Potentially, we’re seeing some movement to removing GRC [Guaranteed Replacement Costs] from base [home insurance policy coverage], but building in GRC as an optional endorsement. Different coverages for roof versus the siding,” says Homanchuk.
In GRC endorsements, a home insurer offers to pay for the full replacement cost of the home, even if that amount exceeds the actual cash value of the home.
Another form of optionality would be offering green coverage to build back better, said Homanchuk.
“There’s a lot of push towards a Net Zero kind of build,” she said, referring to reducing the carbon footprint of building a house down to zero. “We could see…a move in Ontario where there are actually regulations in place, where customers do need to build back in a Net Zero way.
“In that regard, Gore does have a green offering that’s built into an optional endorsement. It allows customers [to] build back in a way that’s more environmentally friendly. So, we’re giving that consumer the choice to build back better. I think you’re going to see a lot of that type of movement in the industry.”
More optionality does play into one pillar of the broker channel’s value proposition, Homanchuk observed. And that is to educate their clients about the choices available to them.
“There’s a lot of potential for optionality, and with that, there are risks that consumers really need to know about,” she said. “I think what I would take away from this is, there’s a lot of education that needs to flow through the system. Consumers look to those that they trust, the government regulators, the insurance bodies like IBC [Insurance Bureau of Canada], and insurance companies.
“More importantly, they trust their brokers, because that’s who they’re talking to. And…[given] all of these trends, consumers need to talk to someone about what’s out there, and what’s possible. It’s a great opportunity for conversation.”
Feature image courtesy of iStock.com/Eoneren
