In this issue of Managing Risky Business, read about:
Work to renew the Group Program is now well underway. In May, HSC CEO Howie Wong and I, along with our program broker, met with current and prospective underwriters. The insurers we met with were concerned about the property claim costs that the group incurred during the 2013/14 policy term. That was a difficult year, which started with a catastrophic fire in a seniors’ complex in Kingston and was marked by numerous claims from winter ice storms.
To assist these insurers in having a balanced perspective of our program, we pointed out the reduction in claims and claims costs in the first half of the 2014/15 term and the great risk management work that providers have been doing. Tenant insurance, well-attended emergency planning seminars and updated property values helps paint a picture of a well-managed risk that insurers want to see.
We’re cautiously optimistic of the results of our initial negotiations. However, this is a process that occurs over time. We will keep you posted on the results. In the meantime, electronic renewal applications have been sent out to providers and approximately 1/3 of our total group has returned completed applications to Marsh Canada. If you haven’t completed your application yet, please return it as soon as possible or contact me if you need assistance!
My conversations with both underwriters and the program broker also suggested that the days of $1,000 property deductibles for corporations may be ending as they are no longer sustainable – such a low deductible is growing increasingly costly for underwriters to offer to groups.
To give you a sense of what this means in dollars and cents, I asked our broker to estimate savings on property premiums and contributions to the property claims fund trust for deductibles over $1,000:
This estimate does not account for construction type or other factors – as such, it’s a fairly conservative estimate. Regardless, there are savings to be had! As you move towards making decisions for the 2015/16 policy term, I would strongly encourage you to review your deductibles with Marsh, see the premium impact of various deductible levels and if you have a $1,000 deductible, consider adopting a $2,500 or $5,000 corporate deductible.
One of the ways to ensure that HSC stays connected with sector business challenges is through its sector-led board and working groups. To improve our efforts on risk management and ensure that they’re in sync with the needs of front-line housing professionals, HSC has established a new Insurance Reference Group.
This group will monitor insurance claims to help identify and assess trends and developments; monitor and manage our program’s service providers; participate in RFP evaluations and help us develop additional front-line risk management tools.
Our group held its first meeting in mid-July and had a very lively discussion on a range of topics, including the question of raising the group deductible. One way of controlling insurance costs is to adjust your deductibles. By raising your deductible to the right amount, you can achieve the lowest cost of risk. Raising the minimum group property deductible would enable providers to save money on insurance premiums. However, this would mean that smaller claims wouldn’t be covered.
We’d like to hear your opinion on this idea. Vote in our poll!
Customer Experience Pilot
To further assist us in delivering the best possible service to you, HSC Insurance & Risk Management is undertaking a pilot to assess and evaluate our customer’s experience of our services. This is the first step in a broader move by HSC to evaluate satisfaction with its services and identify areas for improvement on an ongoing basis – which is part of HSC’s 2015-17 Strategic Plan. Don’t worry – we won’t inundate you with long surveys! The goal here is to be targeted in our approach to make our services easy to use, deliver greater value to the sector and to help our staff improve their interactions with you. Participation is completely voluntary!
You may have already noted some of the tools we’re using: we’re asking people to evaluate Managing Risky Business with a two questions at the bottom of each issue; we also included a three questions at the end of our new electronic renewal form to formally evaluate its introduction. We also plan to ask attendees of our educational sessions to briefly evaluate the applied value of the material a few months after the session. And now that we have a claims coordinator we intend to ask providers who have recently closed property claims about their experience.
Over the past three years, HSC has been working on a legal tax question relating to the HSC Property Claims Trust Fund (PCTF) and whether it is subject to provincial Retail Sales Tax (RST).
As you know, in 2011 HSC set up the claims fund to pay for the group’s self-insured deductible. After voluntarily collecting RST on the fund in the introductory year, HSC sought a legal opinion from our tax lawyers in March 2012. Our tax lawyers determined that contributions to the fund should not be subject to RST because it is not an insurance premium or a service — rather, it operates like a trust fund. The program insurance brokers concurred with this opinion.
As part of this process, our tax lawyers shared their views with the Ontario Ministry of Finance. The Ministry subsequently audited the PCTF and continues to analyze the matter. To date, a final ruling has yet to be issued. As a result, HSC has not collected RST on the PCTF component of provider insurance costs since the 2011-2012 policy term.
HSC expects a ruling in the coming weeks. In the meantime, we are continuing to work on behalf of providers in making our case to the Province. We are also developing response plans in the event of a negative ruling — the worst case scenario being the retroactive collection of all outstanding RST (2012-2013 to present) from program participants.
We remain hopeful of a positive outcome. However, to ensure that the sector is aware and informed of the matter, HSC brought this issue to the attention of the Service Manager Housing Network earlier this year. We will keep you updated on any developments. Should you have any questions, please do not hesitate to contact me at email@example.com or by phone at 1.866.268.4451 ext.314.
It is gratifying to see more and more residents of social housing across Ontario protected by tenant insurance. Much of this growth has been the result of Boards of non-profits and co-ops making tenant insurance mandatory in their buildings.
It’s also been good to see tenants making legitimate insurance claims. They are utilizing the product as intended. In 2005 when I first approached the insurance market to develop a group tenant insurance program, they politely declined. There was no underwriting history, and this was a challenging group to define. Insurers expressed concern about the concentration of risk. They were also worried about whether “our” tenants would abuse the coverage.
Jump to 2015. Our program today insures roughly 8,000 residents across the Province. Since November 2014, 36 claims have been opened, comprising of a mix of property claims (water damage, theft, and fire) and two liability claims (both cooking fires). Tenants are not abusing the product and the loss ratio is comparable to the best group personal lines programs. This is very encouraging to see.
One of the benefits of tenant insurance is that it will pay for the damage that a negligent tenant is legally obligated to pay. However, landlords are not a party to the tenant insurance contract and they have no direct access to the policy. Just because you think the tenant was negligent may not be sufficient to make a successful claim. Therefore, it is vital to document the process from the moment you are aware of the incident.
An Example and Checklist
Let’s imagine that there has been a cooking fire that’s resulted in damage to a unit. Here’s an outline of the process we recommend:
What to Expect After The Claim Goes Through
If the tenant insurer determines that the insured resident was indeed negligent, they generally expect the landlord to fix the damage and submit the claim for their consideration.
Also unlike your corporate property insurance, which covers the replacement of old cupboards with new cupboards, the tenant insurer will only offer Actual Cash Value (or ACV). ACV is the depreciated value for the property that was damaged. If the cupboards are 20 years old, you will be offered the value of 20-year old cupboards. All this is subject to negotiation.
Finally if you have made claim on your own property insurance, your insurer will manage the recovery process for you. If your insurer is successful in recovering ACV and the recovery from tenant insurance exceeds your corporate deductible, you can expect to recover your full deductible and your insurer will keep the balance, crediting your loss history.
Have questions about HSC’s Tenant Insurance Program? Need further advice in how to handle claims? Contact Kisha Reddish at firstname.lastname@example.org or phone her at 1.866.268.4451 x.241
While disasters aren’t pleasant to talk about, they can help us get new insights into risk management and lend perspective to the human and economic cost of claims. The following are just some of the stories on incidents reported in the news since my last update:
Finally, there’s another story worth noting in the news. This is not a member of our program but serves as an important caution on the importance of complying with the Ontario fire code. A St. Catharines’ landlord was charged $20,000 for failing to comply with an inspection order to fix his multi-unit property to meet the code. You can read the full story here.
Since our last update, our small team here has been busy working on the HSC Group Insurance Program renewal, continuing to emphasize the importance of tenant insurance, managing claims and supporting providers in their risk management efforts with education and hands-on support.
In mid-April, we put a HydroVac Truck on a train to Moosenee to clean and dry the site of a flood (pictures below). We believe that tenants and providers in Moosonee and other remote locations should have access to the same quality claim service as urban organizations – and thankfully the power of the group makes that possible.
On a related note, in March, we were able to bring on-board a new provider in Smiths Falls, which had trouble obtaining insurance from other insurers and are now working closely with them to improve their risk profile. Then in May, we were positively referenced in a story in May in Cornwall Newswatch relating to their insurance.
In terms of meetings and outreach with clients, here’s where we’ve been:
If you’d like to meet with us, we’d be happy to visit you in your community. Simply send me an email or call me at 1.866.268.4451 x.314