Opinion: Canadians are bailing out insurance companies

Forms for a home insurance policy

 

https://calgaryherald.com/opinion/columnists/opinion-canadians-are-bailing-out-insurance-companies

As we enter another season of climate disasters, Canadians brace themselves in the hopes that their properties and lives will not be uprooted, or if they are, that recovery will be swift.

After any disaster, governments and non-profits quickly mobilize to assist those in need. Take Jasper, Alberta, and the July 2024 wildfire for example, where evacuation centres have been established, and the Canadian Red Cross and the provincial government is providing financial resources to impacted households. These response mechanisms are crucial for evacuees as they scramble to secure safe lodging and support in the chaos of a mass evacuation, but they also raise an important question: where do private insurance companies fit in?

A home insurance policy is known as a “peace of mind” contract, designed to protect policyholders against financial pressure and distress. Insurers can, and arguably should, advance funds (typically $10,000 to $30,000), where a home is significantly damaged to provide for emergency costs upfront. These advances can be accounted for against the claim as it progresses, and needs become less dire. This approach gives families the stability they need to begin recovery in earnest, alleviates some of the burden on government and non-profit organizations resources, and saves those resources for families who are underinsured.

This was a standard, but delayed response, from most insurers after the Fort McMurray, Alberta wildfires in 2016. However, having met with several families from Jasper to assist with their insurance claims, we are now seeing delays in these cash advances.

While there are factors that impact insurers’ ability to advance funds quickly (such as known damage levels), their failure to do so leaves a void that government and non-profit organizations have to fill. If all levels of government and organizations like the Canadian Red Cross can mobilize quickly to provide emergency funds and resources, why can’t insurers do the same?

Being forced from your home under a wildfire evacuation is a nightmare scenario, and without emergency funding it becomes a source of longstanding financial distress. While Insurance policies can’t protect us from emergencies occurring, they are supposed to protect us from the devastating financial impacts that otherwise results.

What’s more is that insurers actually benefit from dragging their feet on providing advances. For example, an insurer will use the principle barring double recovery to reduce payouts by any amounts received from governments or non-profit organizations. In essence, taxpayer dollars and generous donations end up subsidizing insurance companies instead of going directly to those who need help the most.

My team and I have seen this scenario play out time and again for the families we have represented – and it needs to change. Canadians need to push for accountability from their insurers nationwide to provide early and fair advances to alleviate the drain on public funding. Alternatively, organizations and governments need to push to reclaim these funds from the insurers when a claim is successfully processed, restoring funds for Canadians in need rather than leaving the company with the windfall. This change is not just a bureaucratic adjustment; it’s a crucial move towards fairness and justice for those who rely on these funds.

We Canadians are a generous and resilient people. Together with governments, non-profit organizations, and insurance companies, we can create the safety net that our communities need to bounce back from climate disasters.

Fy Virani | Founding Partner