Home insurance faces fundamental changes

July 6, 2020 — ALMOST one-third of Canadians plan to work from home even after COVID-19 restrictions are lifted, according to a recent survey from Rates.ca.

And that could change the kind of home insurance people require.

“Home insurance is not business insurance — it’s not designed to meet the specific needs of individuals who work from home,” Rates.ca editor Liam Lahey said in a news release in late June.

The firm said data has shown that there has been a shift in the kinds of perils that are most common with more people in their homes all day due to lockdown measures.

It said flood damage has become less of an issue, as problems like burst pipes and leaking water tanks are being noticed more quickly, but fire rates seem to be rising.

“The data that’s being reported through the fire marshal is that they are seeing an increase in house fires, because people are home more, they’re cooking more, but also you’re likely cooking while working, so they might not be focused on one task versus the other so that might lead to more fires,” Pete Karageorgos, director of consumer and industry relations at the Insurance Bureau of Canada, told Thompson’s.

Working from home also means that people have items in their homes that belong to their employers, including computers and cell phones, that could require additional coverage.

“It’s a disclosure question,” said Chris Floyd, president of the Insurance Brokers Association of Canada.

“If someone is working from home they need to ensure that equipment that’s owned by their company is insured properly.”

The IBC’s Mr. Karageorgos said liability is another concern. People are ordering more items to be delivered and even seeing clients in their homes.

“The potential for someone being injured on someone’s property . . . someone tripping or falling on your steps or porch and injuring themselves opens up the potential for a property owner to be sued,” he said.

Home insurance rates aren’t likely to rise to any considerable degree due to these changes, but homeowners need to make sure they’re covered if circumstances have changed.

“It’s not always about what you’re paying,” Mr. Karageorgos said. “People also need to consider that they’re properly protected, so if there’s a greater risk it needs to be understood in order to have the appropriate coverages in place.”

Cyber coverage could also be a major concern with the shift to work from home, as people move away from working on secure networks to home setups.

“Cyber is something that everyone needs to be aware of,” he said.

“Businesses obviously need to be concerned because of the exposure to their networks and data. And individuals need to be cautious of that as well, not just for business but also their personal lives.”

Mr. Floyd agreed, noting that people working from home should consider obtaining personal cyber coverage to protect themselves in case of a breach.

The Rates.ca survey suggests that auto insurance is likely to see a lasting shift as a result of the COVID-19 pandemic as more people work from home even after restrictions are lifted.

It found that 25% fewer people expect to travel to work post-lockdown than did before the pandemic. One result of that will likely be a demand for more usage-based insurance and telematics in Canada.

“Companies have realized that how they rate pleasure use (of vehicles) has changed because of COVID, so moving from a business use to a personal use rate wasn’t sufficient to really recognize the lack of driving that was really happening,” Mr. Floyd said.

“I think what we’ll see is the acceleration of telematics or usage-based insurance. We’ve already heard some companies talk about accelerating that.”

The push will likely come from consumers who have been frustrated with rebates that were smaller than they’d hoped for from insurers, he said.

Canada has been slow to adapt to telematics compared to the U.S. and U.K., which have much more robust UBI programs, he noted.

Part of that is because of a challenging regulatory environment in Canada, the IBC’s Mr. Karageorgos said.

“The challenge with the Canadian regulatory environment is that in those provinces and jurisdictions that do have it, it’s typically just offered as a discount and there are specific metrics used to calculate the discount,” he said.

He agreed that the pandemic is likely to increase interest from both consumers and insurers for this type of insurance.

While traditionally rates have been based on history and broad trends, UBIs would allow an automatic response to a change in driving levels that would reduce confusion for insurers as well.