In this issue of Managing Risky Business, read about:
- The Claims Picture Since Renewal: Learn about how we’re doing on claims since the beginning of the term and how it measures up to previous years
- Looking Under the Hood — How We Underwrite the Property Insurance Component of Our Program: Take a deep dive into the inner workings of our property program. Learn about how we handle risk and where the money goes when you buy property insurance
- In the News: Media coverage on recent claims
- Payment Changes for Tenant Insurance: There are changes to the types of payments the HSC Tenant Insurance Program will accept from new and renewing clients. Premiums are also changing. Read about who’s affected and how tenants can maintain their coverage
- Preventing Pipes from Freezing and Bursting: Tips and links to articles on what you can do to avoid these preventable incidents that can displace tenants and damage building equipment
- Cyber Security & Your Organization: Learn about this emerging area of concern and download the slides from our recent webinar on the topic
- Insurance Webinars in 2022: Read about the exciting learning opportunities we have planned for the year ahead
The Claims Picture Since Renewals
We have had somewhat average start to our 2022 insurance term. In the first four months of the term, our program saw a total of 31 claims with an estimated cost of approximately $1.8M. If we look at the past five years, the number of claims this term is more or less average. Costwise, however, we are doing considerably better than our five-year average of $3.2M – though last year was exceptionally difficult due a catastrophic claim in early January.
Fire claims continue to represent the bulk of the claims and remain the most expensive. The graphs below show the distribution, coloured based on the type of claim fire (magenta), water (blue), weather (green) and other (orange).
In terms of frequency, the mix of claims is different compared to the previous year. Aside from claims where the cause is unknown or under investigation, we have seen fewer preventable claims this year – and this is notable since the pandemic has meant that residents are spending more time at home.
We are hoping that we can continue to keep claims costs low for the rest of the year – though catastrophic fires (historically the basis of most of these claims) or weather-related events that affect whole regions are difficult to predict. Some property claims, however, are preventable. We encourage you to visit our online resource centre for tools and templates to assist you in managing risk.
Should you have a property claim and need help, please view our checklist on the immediate steps to take and visit our webpage about submitting a claim for the steps on how to proceed and important telephone numbers.
Looking Under the Hood: How We Underwrite the Property Insurance Component of Our Program
While we often make reference to the underwriters that insure our program and the Claims Trust Fund (or Claims Fund), we don’t dive into specifics about who and how risk is structured in our program. In this story, we will take a quick look at the topic.
Property insurance costs in our program are structured as a series of layers. The diagram below shows all of the layers and every organization involved in each layer:
Provider Deductible and Claims Trust Fund:
The deductible is how much you, as a provider, will cover when you have a claim. The next layer is the Claims Trust Fund, which is administered by HSC. It serves as a program-wide retention layer, covering claims under a certain threshold — $1M for Stream A (smaller providers), and $2.5M for Stream B (the larger providers). You’ll note that Stream B providers contribute more than Stream A. This is because their property portfolios are larger and so there’s more risk to cover.
Most claims are covered by the Claims Trust Fund (CTF), which has been set at $17M for the current term– a number which is determined working closely with Marsh’s actuarial team based, in part, on our program’s loss history in previous years. The CTF and associated claims represent the bulk of the insurance team’s work during the term – we typically have between 150 and 170 claims per year that need to be actioned and processed. While the CTF is part of your insurance costs, if we have a good year, the extra money stays in the program.
Insurance Layers
Once we exceed the CTF – whether through a sizable claim or the exhaustion of the CTF entirely – insurers begin to pay for claims. Each layer of our program has a ceiling for the amount insurers will pay out. There are 13 insurers involved in the primary layer of our program – 11 UK and 2 domestics, with each taking on a certain percentage of the program risk. Subsequent layers have fewer insurers, but maintain a mix of UK and domestic.
HSC and Marsh (the program broker) must negotiate with each underwriter at each layer – on both the percentage they will insure and the amount of premium they charge. We work hard to build confidence and trust in our program as we market it to both domestic and UK underwriters. Negotiations begin in the spring for a term that starts in November – with so many underwriters and layers it can take a long time! And before we send out invoices at the end of September, we must also allocate the total premium, based on total insured values, claims history, risk credits and other factors. More information on this process can be found in our Program Guidelines available on our website.
Our program is distinct from other group programs, and we’re proud of our active role in the management and administration of the program. It helps us control costs for providers, provide targeted education and resources to help us reduce claims and ultimately protects our residents.
Interested in learning more about our program? Email us at insurance@hscorp.ca
In the News
Here are the claims that have received news coverage since our last update.
January 2022
Wawa FD called to residence at Hillcrest Heights
Cause: Electrical
December 2021
Man, 65, charged with arson after apartment fire, Brantford
Fire at Vanier Towers sends one person to hospital, Hamilton
Cause: Explosion
Woman in her 70s dies after two-alarm fire in Upper Beaches, Toronto
Cause: Under investigation
November 2021
‘It was a nightmare’: Neighbour recalls weekend fire that leaves one firefighter injured, London
Cause: Arson
Residents evacuate after a Guelph apartment fire
Cause: Cooking/Kitchen
No injuries reported following Nepean townhouse fire, Ottawa
Cause: Cooking/Kitchen
Cameron Street fire causes $100,000 to Peterborough home
Cause: Unknown
Payment Changes for Tenant Insurance
As HSC CEO Howie Wong mentioned in his December newsletter, we recently had to make changes to our Tenant Insurance Program payment options. To address the increasing cost of claims to the program, the price of tenant insurance will increase approximately $2.50/month for most clients. Also, due to challenges associated with the processing of Ontario Works (OW) and Ontario Disability Support Program payments, HSC Insurance is unable to continue to offer a government pay option.
These change to the program will come into effect with policies expiring after February 1, 2022.
Clients will be required to select annual or monthly payment by credit card or direct debit.
This change affects:
- OW/ODSP clients that have such pay-direct billing arrangements,
- Their OW/ODSP caseworkers and
- Housing providers who house OW/ODSP clients that match the above criteria
To maintain coverage, existing clients must set up a new account and method of payment after receiving the letter. Clients or caseworkers can do so by calling Marsh Canada’s Private Client Services at 1-866-940-5111.
HSC has already communicated to members of OMSSA’s Employment and Income Network about the government payment change. Providers that use the brochures to raise awareness of HSC’s low cost-option for coverage can order updated brochures by visiting this webpage.
Preventing Pipes from Freezing and Bursting
In our program winter weather almost always increases the number of burst pipe claims we get. While burst pipe claims tend not to be very costly, they can be disruptive since they can displace tenants, damage building equipment or contribute to the formation of mold.
Extremely cold weather as well as freeze and thaw cycles put a strain on pipes, which can then lead to bursts. As a result of this, preventative measures revolve around mitigating the impact of these conditions.
- Insulate exposed plumbing: Inspect the property for pipes that are either outside the building or in unheated areas like attics, crawl spaces, or even a common parking garage. There is a variety of heat tape or insulating material you can use to fit and wrap around exposed pipes.
- Keep the inside of the building sufficiently warm: Keep thermostats at 10 degrees (50 degrees Fahrenheit) or higher in both common areas and tenant units to keep the inside of buildings from freezing. The heat will also seep into unheated areas (e.g., crawlspaces and attics) that contain plumbing.
- Let faucets drip and open up cabinet doors under sinks during cold snaps: This tip applies particularly to providers with single-family buildings or those with vacant units. Both actions enable circulation (of water and heat) that deters freezing.
- Communicate with residents to reduce the risk: Being able to warn residents about potential freezing weather and actions they should take will enable you to protect the entire property, rather than just common areas or mechanical rooms.
Further information and tips:
- 10 tips to prevent frozen and burst pipes
- Tips for managing frozen pipes
- How to Turn Off Exterior Water and Avoid Burst Pipes this Winter
Cyber Security & Your Organization
We don’t tend to think about cyber security when we think about the work of housing. However, technology is increasingly becoming a vital tool in our operations in managing repairs, capital planning, handling waiting lists and more. Providers are also affected as online work among vendors and Service Managers is becoming the norm.
As a result, cyber security has become an area of increased concern both in and beyond the housing sector. One cyber threat, ransomware, involves malicious software that blocks organizations or threatens the release of confidential information until a sum of money is paid. In the first half of 2021, global ransomware attacks increased by 151% compared to the previous year. In Canada, the estimated average cost of a data breach (which includes but is not limited to ransomware) is $6.35M.
Non-profits are not immune to the threat. In 2020, hackers began to steal funds from One Treasure Island, a non-profit focused on community regeneration in San Francisco. They stole $650,000 that was earmarked for affordable housing projects. The non-profit did not have cyber insurance and was not able to recover the bulk of the funds.
To help providers in our program to stay protected, HSC Insurance offers cyber insurance as an optional coverage. In addition, we put on a webinar on cyber risks on January 20. In it, experts from Marsh Canada covered:
- Examples of common ransomware attacks so that you are prepared to spot them
- Minimum security controls insurers expect clients to have in place
- Additional steps you can take to protect your organization
Materials from the session are now available online.
Insurance Webinars in 2022
Some of you may have attended our recent webinar on Cyber Insurance. If you were unable to attend it, we have now posted a recording of the webinar on the HSC website.
We are also in the planning future insurance webinars for the year. Topics will include:
- HSC’s insurance claims process and program trends
- The renewal outlook for 2022/23
- Flood preparedness
- Fire safety and prevention
- Contingency planning
To get on our mailing list and hear about events when registration opens, add yourself to our HSC Events mailing list.