Insurance sector responding to immediate impacts of COVID-19 and looking to an uncertain future

As COVID-19 slows economic activity, Canadian insurance providers are offering consumers and businesses a break on premium costs and other types of financial relief. istock.com

Canada’s insurance providers are taking action to help their customers deal with the short-term impacts of COVID-19. At a time when large numbers of Canadians are working from home, many insurers are offering consumers lower auto insurance premiums, to reflect reduced driving. Companies are also providing financial relief to both consumers and businesses losing income and revenues – for example, by deferring premiums and waiving fees.

On April 8, 2020, the Insurance Bureau of Canada (IBC) announced in a news release that its member companies would provide relief measures for a 90-day period. This national association represents private home, auto and business insurers, which collectively make up 90 per cent of the property and casualty (P&C) insurance market in Canada.

“This is an incredibly challenging and uncertain time for many Canadians, and insurers want to help alleviate some of the financial burden for the most vulnerable. Insurers understand that many drivers are no longer commuting or using their vehicle as regularly, which could result in savings,” said Don Forgeron, president and CEO, IBC.

In the release, the IBC estimated its measures could result in $600-million in savings to consumers.
As is true for most sectors of the Canadian economy, companies that provide insurance and their customers are primarily focused on dealing with their most immediate challenges.

One of the questions that individuals and businesses are asking in the short term is, “Does my insurance policy cover me for losses stemming from the coronavirus pandemic?” Given that we are dealing with a large-scale, rare event, answering that question is not always easy, says Doug Grant, partner at Insurance-Canada.ca Inc., an organization that provides independent information about technology and the business of insurance.

“One of the big issues relates to businesses ordered to shut down or that have voluntarily shut down to protect their employees,” says Mr. Grant. “Government is backstopping some losses through a range of support programs, and certainly that helps. At the same time, companies are wondering if the insurance they bought to protect against ‘business interruption’ will be triggered by COVID-19 losses.”

In a Q&A on its website, the IBC says that, generally, commercial insurance policies and traditional business interruption policies do not offer coverage for business interruption or supply chain disruption due to a pandemic. At the same time, it notes that some organizations may have purchased specialized coverage that does apply, and it advises them to seek clarification from their insurance representative.

The organizers of some large international events postponed or cancelled for this year have reported they had insurance protection against pandemic-related losses. These include the Tokyo Olympics and the Wimbledon tennis tournament in the U.K.

In addition, Canadian dental professionals have business interruption insurance that includes pandemic coverage. This insurance has been sold to dentists and dental specialists across the country by CDSPI Advisory Services Inc. and is underwritten by Aviva Canada.
In the longer term, the insurance sector may find itself adapting to the risks theoretically posed by future pandemics, says Mr. Grant.

“Newly identified risks have emerged in recent years and they have generated new insurance products and services. For example, earthquake insurance is a relatively new option, and we’ve seen new policies to protect against overland flooding, which is increasing. And the emergence of the internet and online commerce has led to privacy and cyber-security insurance,” he adds.

“Will the risk of worldwide pandemics increase in the coming years, and will this become part of the insurance landscape? These are questions for the longer term.”

For more stories from this feature, visit globeandmail.com