Did you know that originally home insurance traces back to marine policies in the 18th century where a ship’s cargo could be pledged in exchange for a loan?
Since then, the industry has made remarkable strides, evolving from the aftermath of the Great Fire of London in 1666, a catastrophic fire that swept through London, destroying 13,200 homes.
Although insurance adjusters and companies have seen great improvement in coverage options and advanced risk assessment methods throughout the years, there are still many new challenges that continue to affect insurers.
In this article, we’re outlining the future of the home insurance industry in Canada, equipping adjusters to prepare for the challenges and opportunities that lie ahead, such as increasing premiums, technological leaps, and a shortage of skilled workers.
1. Increasing Premiums
As the insurance landscape continues to evolve, one of the most noticeable shifts is the relentless surge in premiums. Although we also saw this trend in 2023, it is still just as relevant in 2024.
The following insights shed light on the contributing factors and repercussions of increasing premiums.
High Repair Costs
Should a policyholder become displaced due to significant damage, like a house fire, and require home renovations, their claim costs can skyrocket.
According to Water Mold Fire Restoration Toronto, most home fires that are significant enough to require professional attention rarely cost less than $2,000. On average, the Water Mold Fire Restoration Toronto’s projects cost around $10,000 per 1,000 sq ft.
The costs of repairs are so high due to various factors, including the increased cost of labour prices, inflation, and the increased cost of building materials.
Unfortunately, we continue to see these costs rise. For example, lumber prices in 2023 were $362.80 per thousand board feet and are now $557.00 per thousand board feet, according to Macro Trends.
Increased Natural Disasters
In 2023, there were $3 billion in natural disaster insurance claim payouts.
The following are some of the most expensive natural disasters in Canada in 2023, according to the Government of Canada:
- British Columbia wildfires: Over $1.1 billion
- Nova Scotia wildfires: $250 million
- Montreal-Quebec glaze storm: $335 million
- Eastern Canada winter storm: $152 million
- Quebec floods: $330 million
- Alberta Tornado: $100 million
Unfortunately, we aren’t seeing the amount or costs of natural disasters going down any time soon. According to the Climate Institute:
- The cost of weather-related insured catastrophic losses was twice as high from 2010-2019 compared to 1983-2009.
- The average cost per disaster has jumped 1250% since the 1970s.
- A typical storm or flood that cost around $8 million in the early 1970s now costs over $110 million.
- Over the past decade, the annual expense attributed to natural disasters and associated losses has climbed to approximately 5-6% of the yearly expansion in Gross Domestic Product (GDP.)
2. Continuing Technological Advances
What was once an in-person meeting with policyholders after a disaster and many filing cabinets filled with essential documents and files has turned into email communications and cloud-based software housing all documentation.
Although adjusters and insurance companies have started to take advantage of new technologies, such as AI chatbots and more email communication, there are still many technological advances that we will see entering the home insurance industry.
Artificial Intelligence (AI)
After the advent of OpenAI’s hard launch of “revolutionary” AI tools like ChatGPT in 2022, industries across the globe have been looking into AI tools that can streamline processes and help them save time, resources, and money.
The home insurance industry has bandwagoned on the AI journey.
As AI tools have become increasingly popular, many software companies are releasing AI tools that will transform claim processing, risk assessment, and customer service. Some of these tools include:
- Snapsheet: Snapsheet uses AI algorithms to streamline and automate the claims processing workflow. It employs computer vision to assess damages from photos submitted by policyholders, accelerating the claims approval process.
- Roost: Roost offers smart home devices and utilizes AI-driven analytics to predict potential risks, such as water leaks or fire hazards. These insights help policyholders proactively address issues, reducing the likelihood of claims.
- Shift Technology: Shift Technology uses AI algorithms to analyze patterns and anomalies in claims data, helping insurance companies detect potentially fraudulent activities. It enhances the accuracy of fraud identification and minimizes false positives.
- Riskonnect: Riskonnect allows people to file claims online, and their AI tool will assess its validity and even flag potentially fraudulent claims, resulting in faster and more accurate claims processing.
These are just a few of the dozens of AI tools surfacing in the insurance realm. We can expect more tools to be released and the accuracy and advancements of these tools to improve over time.
Cyber Security Support
Given the rise in technology usage for data storage, more and more insurance companies must invest in cybersecurity to protect sensitive policyholder data and prevent cyber-related threats, such as unauthorized access, data breaches, and identity theft.
The potential harm from a data breach can be catastrophic, leading to financial losses, reputational damage, and legal ramifications.
And let’s face it, insurance companies are busy enough; the last thing they need is a cyber security attack.
The Insurance Bureau of Canada has a very insightful article about protecting your organization from cyber risk that outlined a handful of measures insurance companies should put in place to enhance cyber security.
Fraud Detection and Prevention
According to the Insurance Bureau of Canada, insurance fraud costs Canadians well over $1 billion annually in added insurance premiums.
Due to the significant cost of fraud, insurance companies must invest in fraud detection tools to proactively identify suspicious activities, mitigate losses, and safeguard policyholder interests.
There are a handful of fraud detection tools specifically designed for the home insurance industry, including:
3. Adjuster Shortage
The insurance industry has struggled with a shortage of skilled adjusters for quite some time, and it doesn’t look to be getting much better.
Why?
Various reasons contribute to the scarcity of skilled professionals in the field, such as limited recruitment efforts, lack of specialized training, and the fact that the workforce is aging.
With a diminishing pool of qualified professionals, adjusters have to deal with increased workloads, forcing them to spread themselves very thinly.
Unfortunately, adjusters can see a decline in the quality and efficiency of their work as they strive to manage overwhelming workloads, risking potential errors and delays in claims processing.
4. Policyholder Shifts
Lastly, the Canadian population and the way they operate are changing!
Housing Shortages
In 2023, CMHC released a report, ‘Housing Shortages in Canada,’ where they projected that an additional 4 million housing units would need to be built beyond the current projections to address availability and affordability concerns.
There are a few reasons for this shortage, with the primary culprit being the number of households increasing due to growth in the population.
The housing shortage affects adjusters in many ways, including:
- In the event of a policyholder’s displacement, securing temporary housing becomes more challenging.
- The high demand for housing causes construction and repair costs to increase, so should a policyholder become displaced, it will cost more to repair their home.
- Housing values can significantly increase, and adjusters need to be aware of these fluctuations to accurately assess the value of insured properties and the cost of ALE should damage occur.
Aging Demographics
According to a study by Environmental Analytics for CTV News, there are about 7.6 million people aged 65+ in Canada. Additionally, about one in four Canadians will be 65 years or older by 2043.
How does an aging population affect the home insurance industry?
- Seniors have a higher risk of accidents
- Seniors are a less tech-savvy population
- Seniors have greater difficulties with home maintenance
- Seniors may require more accessible housing, so should they become displaced, they will struggle more to find suitable temporary accommodations
Continued Remote Working
According to Statistics Canada, 20% of Canadians mostly work from home. Although this number has declined since 2021, we are seeing more companies offer hybrid models, where employees have a set schedule of both in-office and at-home days of the week.
Ultimately, remote work is positive and negative for insurance companies. Here’s how remote work has affected the home insurance industry:
- With policyholders being home throughout the day, they are likely to prepare more meals during the day, which can result in greater cooking mishaps, such as a stove fire due to leaving food unattended.
- When policyholders work from home, they can detect and respond quickly to emergencies like leaky appliances, burst pipes, or fire outbreaks and take immediate action to prevent further damage.
- If a policyholder offers a service that requires their customers to visit their home, they may not have the correct home insurance policy to ensure any accidental injuries, theft, or property damages are covered.
Stay Ahead by Adapting to Emerging Home Insurance Industry Trends
With new challenges, increasing premiums, worker shortages, policyholder shifts, and ever-changing digital advancements, many insurers and adjusters have a lot of work to do to stay ahead in the industry in the coming years.
However, adjusters don’t have to face these challenges and advancements alone.
Enter Accomsure, Canada’s go-to for providing reliable ALE management support to alleviate the burden on adjusters, allowing them more time to concentrate on claims and advancing processes.
Accomsure’s expertise in ALE management and supporting displaced policyholders helps insurance companies streamline operations, enhance overall claims management efficiency, and better support customers.
If you’re looking to stay ahead in this home insurance industry this year, start by contacting Accomsure.
