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Managing Risky Business: Q4/2015

In this issue of Managing Risky Business, read about:

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Looking Back at 2014/15

As I mentioned in my covering letter, we’ve had a comparatively good year as a group, growing our capacity to manage risk and keeping costs down:

  • In spite of a ‘property claims tsunami’ in October 2015 (the month before the end of the 2014/15 policy term), we managed to achieve a modest claims fund surplus
  • Property claims for 2014/2015 are $11.7M, down from $18M in 2013/14. Only one claim was sent to the insurers, a fire in Renfrew, the remaining property claims were covered by the Claims Fund
  • We worked with well over 300 providers across the Province on contingency plans and day-to-day risk management
  • The percentage of providers that have made tenant insurance compulsory in their buildings grew by 33%, from 42% of the providers in our program to 56%
    • In the HSC tenant program 66 claims were made over the last year, ranging from stolen bicycles to large kitchen fires.
    • The loss ratio is on par with comparable programs (which helps us dispel myths about social housing for insurers)
    • The tenant insurance program has issued cheques to providers in instances of property damage, enabling them to recoup their deductibles

Property Claims

Compared to last year, we have seen a reduction in the frequency of cooking fires. Fire and water damage claims continue to make up the bulk of our property claims – representing 28% and 41% of our total property claims respectively:property

Though we hear less about incidents involving water damage in the media, we do see a lot of these types of claims in our program due to aging infrastructure, tenant accidents and freeze and thaw weather in the winter.

Here’s a historical graph that shows us when you should ensure Emergency Contractor is not on vacation:

water claim frequency

Winter is a particularly challenging time of year for claims. To ensure that you’re prepared, check out Marsh Canada’s winter weather precautions checklist.

Here’s what our overall property claims picture looks like over the past two policy terms. In the first graph below, we’re looking at property claims frequency over the year:

Not all claims, however, have the same financial impact. You’ll note in the graph below that in 2013/14, when we had a $10M Claims Fund, the fund was depleted in the first three months of the policy term due to a number of expensive winter claims, as we reported back then. As a result, for 2014/15, underwriters requested a larger Claims Fund in order to keep premiums steady. This year, use of our Claims Fund was more consistent over the course of the year and did precisely what it was intended to do: fund smaller, more frequent property claims to enable underwriters to focus on larger, less common catastrophic claims:

Liability Claims

Unlike municipal insurance, where liability claims represent the bulk of claims costs and activity, in the housing sector liability claims are less frequent. The graph below shows the breakdown of liability claims to the program over the past two years. Slip, trip and fall claims lead the pack by a considerable margin:

Marsh has a tip sheet regarding slip and fall prevention. In addition, the Insurance Bureau of Canada also has some helpful information.

Insurance Reference Group

The new Insurance Reference Group, which I mentioned in my last update, had its second meeting in mid-October. Topics discussed included this year’s group insurance renewals, tenant insurance and raising deductibles.

The group generally agreed that raising the minimum group deductible would be a positive step – because it would lower the group premium, slow the depletion of the Claims Fund and would encourage providers to be more conscious of day-to-day risk management. Respondents to our poll in the last issue of Managing Risky Business also agreed. However, the group suggested that we should start by focusing on educating Service Managers and providers about the benefits and obtaining feedback on the best approach to take – like we approached the development of the tenant insurance program.

Resolution of RST Issue

Earlier this month we were able to resolve a longstanding issue relating to provincial Retail Sales Tax (RST) on HSC’s Property Claims Trust Fund (Claims Fund). Providers will not have to pay retroactive RST on past Claims Fund contributions.

HSC worked hard to negotiate a ruling that would minimize the financial impact to our clients while complying with the insurance program’s legal obligations. While we were unable to persuade the Ministry of Finance that our Claims Fund should be RST-exempt, we were able to avoid a situation where providers would be obliged to pay any retroactive tax. We were able to do this by:

  • Collecting RST on both the premium and Claims Fund components of provider premiums for the 2015/16 policy term. Moving forward, RST will be collected on both components
  • Negotiating with the Ministry of Finance on behalf of providers to reduce the assessed amount by over 50% — from $2.7M to $1M
  • Directing the $316K Claims Fund surplus from the 2014/15 policy term to cover a portion of the final assessed amount
  • Covering the remaining $691K through a loan from HSC to the 2014/15 Claims Fund. The loan is to be repaid from two 2014/15 Claims Fund sources: recoveries from subrogation actions and any excess funds from current reserved claims. Any unrecovered HSC loan amount will be treated as a 2015/16 operating loss

The resolution of this longstanding issue owes much of its success to the ‘power of the group’ in that:

  • HSC was able to negotiate effectively with the Province because of the scale and diversity of our group, who are made up of large and small providers across Ontario
  • Thanks to the group’s effective risk management this year, we had our first ever Claims Fund surplus at the end of the policy term which we were able to use to address this issue
  • HSC was able to cover the remainder of the RST owing via a forgivable loan due to its corporate reserve, which exists as a result of its revenue generating programs

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Looking Forward to 2016

Now that we’re a little more than one month into our 2015/16 policy term and a new year is upon us, we’re starting to think about ways in which we can further improve the risk profile of the sector and drive down costs. Here are just a few things that you can look forward to:

  • Rewarding loyalty to the group: For 2016/17 renewal, we’re hoping to introduce a discount for providers who have steadfastly remained with our brokered program and have demonstrated a commitment to the values of our group
  • Improving the value of our program for low-risk providers: Providers with few or no claims are the lifeblood of our program. They make it possible for us to guarantee coverage for those with more difficult claims histories. We believe that the key to retaining these providers in the program is by containing increases to the overall group premium. We plan to do this by:
    • Working in concert with Service Managers on effective risk management for providers who regularly make claims and receiving more in claims repairs than they are contributing in insurance costs
    • Encouraging providers as a whole to raise their deductibles beyond the current minimums –particularly those who make claims more frequently since it will encourage them to be more vigilant about risk management
  • Improving to the management of liability claims: At the end of 2014, we committed to improving the management of property claims by taking a more hands-on approach. This has proven to be effective. For the 2015/16 policy term, we have a new carrier for liability insurance so we wish to better control claims costs in this part of the program.
  • Risk self-assessment tool: We’re working on a diagnostic tool to help providers and Service Managers evaluate their practices and the supports they have in place to keep their buildings safe.
  • Better data on tenant insurance: On November 1, 2015, all of our active policies migrated to the HSC Tenant Insurance Program broker and underwriter we introduced last fall. As a result of this, we will have data on tenants in our program in one place and a single process for claims. This will be helpful for providers seeking to maintain compliance on mandatory tenant insurance.

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Recent Insurance Events in the News

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:

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Risk Management News In and Around the Sector

Kudos to Renfrew County Housing, Wellington-Dufferin-Guelph Public Health, Elgin St. Thomas Public Health and Sudbury & District Board of Health. These organizations all recently took action to eliminate smoking from their local social housing portfolios. Renfew implemented a smoke-free policy in late October; Wellington-Dufferin-Guelph is recommending a policy; Sudbury and Elgin St. Thomas is urging both private and social landlords to voluntarily adopt no-smoking policies. Over the border, the United States Department of Housing and Urban Development (HUD) is seeking to ban smoking in American public housing over the next few years. HUD estimates that this “will help improve the health of more than 760,000 children and help public housing agencies save $153 million every year in healthcare, repairs and preventable fires.” Interested in going smoke-free? Check out the Smoke-Free Housing Ontario website for resources.

In September, I was happy to read that our largest group member, Toronto Community Housing, is proposing to implement a series of measures to improve community safety. I look forward to hearing about their progress on these items and applaud their efforts to make risk management a priority. On a related note, there was an interesting article on a pilot to crack down on illegal dumping in Hamilton. One of the pilot’s successes involved a social housing complex where “‘random people’ were driving by and throwing bags of trash near the pickup location for several townhouses. Bylaw covert ops played a role in catching at least some dumpers in the act.” Council is being encouraged to make the pilot permanent.

Over the past few months, we’ve also seen an all-too-regular stream of stories involving low-income tenants who aren’t insured — examples in Welland, Guelph and London are just the tip of the iceberg. In addition to the impact on tenants, it also puts pressure on local social services and community agencies to find resources to help the affected people rebuild their lives and avoid slipping into deeper poverty.

Having adequate risk management supports – such as tenant insurance, regular unit inspections and regular communications with tenants – is also important because tenant behaviours can sometimes result in disasters. For example, a recent fire investigation in Woodstock was the result of a tenant tampering with fire alarms; notably in this case, the tenant was charged. In London, a complaint about bedbugs led the provider to discover that the tenant was spraying furniture with water and kerosene, a highly flammable mixture. Acknowledging the problem and providing appropriate advice to residents enables providers to better manage risk.


Finally, I’d like to thank to Cornwall Housing for sharing this water overflow prevention tip:

Magiplug is a plug that prevents bathtub overflows because the plug opens when the head of water over it reaches a certain level. Seemingly a cost effective way to mitigate the risk of overflowing tubs.

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News from the HSC Insurance & Risk Management Team

Since our last update, our small team here has been busy finalizing the HSC Group Insurance Program renewal, resolving the Retail Sales Tax issue, managing claims and supporting providers in their risk management efforts with education and hands-on support.

In terms of meetings and outreach with clients, here’s where we’ve been:

  • 2015 ONPHA conference in Toronto; Northern Service Managers meeting in Sudbury
  • Claims discussions in Windsor, Peel, Renfrew, Ottawa
  • Risk management sessions in Renfrew, Cornwall, Ottawa, Thunder Bay
  • Tenant Insurance presentations in Toronto and Peel

We’d be happy to visit you in your community to assist you in improving the safety of your buildings and residents. Just send me an email or call me at 1.866.268.4451 x.314.

Have a safe and happy holiday!


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[view previous issues of Managing Risky Business]


Call Me Maybe
One Life
Turn Me On
Glad You Came
Rack City
Stand Behind The Music
Ninjas in Paris
What Makes You Beautiful
The Motto
Wild Ones
Turn Up The Music
Middle Finger
Sorry For Party Rocking
Is Anybody Out There?
Safe and Sound