This week we will be discussing the insurance business and all its aspects. We are living in a moment where we are suffering with the bank institutions and insurance companies, this is the time we will start feeling the consequences of the difficult era we face. Today, we will try to understand what the future holds for us. For that, Manuel DaCosta interviewed Peter Almeida, the Senior Account Executive at Rocca, Dickson, Andreis Inc. which will elucidate us on what is happening in this industry and how we will be affected.
Peter Almeida has been in the insurance business for 35 years. His career started with residential and personal auto insurance and later his focus turned to commercial insurance, especially in the construction sector.
Manuel DaCosta: What is the difference between a broker and an agent?
Peter Almeida: We used that term back in the day, but nowadays agents don’t exist anymore. There is a difference between what used to be an agent and a broker. An agent would be someone that works directly for a specific insurance company and that individual would provide coverage just with that one company. When you have an insurance broker, they shop around, they check with different markets to see what’s the best coverage and premiums available.
MDC: What is the meaning of Insurance?
PA: It’s protection for your assets, whether that’s your personal home insurance, auto or commercial buildings. You buy protection in case something happens, like a fire for example. If you are borrowing money from a bank or other financial institution, they will demand insurance to protect their assets, that could happen when you buy a new home, a commercial building or even a car, so they will be named in that policy.
We also do bonding, which protects the principal of the property or whatever the construction may be. We will guarantee that company or contractor will be able to complete the project, so we cover the financial aspect of that if for whatever reason the contractor was not able to complete the project. There are many different areas of Insurance. At RDA we look after all of it, there’s also the group benefits and financial services part in which we also get involved.
MDC: For most people, this is hard to comprehend, unless you are really involved in the subject.
PA: That’s the thing. We always think of it as ‘it’s my house and car insurance’ but insurance is connected to so many other things and then we have the spin offs from insurance, as auto repair garages, parts manufactures, if there’s a fire the contractors that have to do the work. There are a lot of other industries related to insurance.
MDC: What should people expect from a broker?
PA: It’s a difficult time. What people should expect when a broker is assisting that individual is that he will try to find the best product, the best coverage, premium… but today, that is becoming really difficulty.
It’s complex. We would like to help people, but in many cases it’s a dead end. There are certain sectors in particular where we get a call and tell people ‘If you have a renewal, just take it’ regarding of how much will cost. Sometimes we get referrals from clients we already have, and the reality is that we really can’t do much for them.
MDC: With the amalgamation of insurance companies, it seems like the market is tightening and some insurance companies refuse to cover certain aspects of business. Right now, if it continues as its going, costs will continue to go up. What kind of pressure does that reflect on you as a broker company? What makes the major and best companies want to work with a company like yours?
PA: The other day, I was talking to a colleague of mine, we were thinking about insurance companies that used to exist but were merged with another company or have been bought out, and we came up with at least 20 names, from the time I started. Back In the day, we had a lot of ‘mom and pop’ brokerages and it was probably easier to get a contract with an insurance company. The requirements were also lower. That changed over the time, companies want large volumes, it’s very hard for startup brokerages. Even though it’s still competitive, we ended up with fewer companies, and If you are going to try to negotiate a contract with an insurance company it’s all about volume. They will take the reserve companies and those are fewer and fewer. It’s hard to try to add to that portfolio of insurance companies. RDA deals with the major insurance companies, however right now the competition is not that much because they are looking into adding to their portfolio.
Even the brokerages are being bought out or merged to create a bigger company, like the insurance companies.
MDC: There are numerous small businesses that will disappear from Canada because they can’t get insurance or because the premium value is so high, they can’t operate. This is an industry supported by people and mandated by the government. Who controls the insurance companies to guarantee people are protected?
PA: That is a complicated question because it leads to various areas. First of all, the government-mandated insurance is only auto insurance. On the other hand, you don’t really have to buy liability insurance, but it would be very unwise not to do so. If you are working for someone, nowadays, most people will want a certificate of insurance.
It is difficult and sad, it’s no fun for us as brokers that we can’t come up with a good resolution for the individual. In certain sectors, like snow removal, it’s been really difficult for them. You have to look at certain things. There are many claims in that area, it’s almost impossible to keep certain areas cleared of ice and some things need to be adjusted. So, for the contractor its tough, we see some of the claims that come in, some of the times it’s ridiculous. If you think about it, how can any contractor guarantee that when they clean a parking lot, for example, a few hours later, won’t be a piece of ice? It’s impossible, weather conditions change throughout the day. What can a contractor do to eliminate that? We are demanding too much of the contractors. Another problem is that a lot of the property management companies and property owners put all the onus on the contractor, so they have wavers of segregation. So basically, anything that happens, they get a statement of claim or a notice, and is passed along to the contractor. They are absorbing all the risk, yet when they try to increase their prices during the wintertime, people don’t want to pay.
MDC: What would you tell a restaurant owner today?
PA: Restaurants and the food business are other areas that have been hit very hard. I have a couple of friends that have restaurants and they tell that between the increase in insurance cost, the suppliers increasing their products, some of the employees demanding raises because they feel that they are at risk since they go to work in the middle of a pandemic… it’s not easy.
MDC: Is the pandemic being used by the insurance companies to gauge the consumer, to get rid of sectors they don’t want, to tight the market in their favor? Or was this something originated before the pandemic?
PA: I think the pandemic has just expedited everything. We were already getting into a hard market, it started probably a year or so ago. We were going to get to a really hard market at some point, the pandemic just speed everything up. The last time something like that happen was when we were heading to a hard market and 9/11 happen. Overnight, that changed everything. To a certain extent that is kind of what we are experiencing. Now the problem is, when is it going to go back to being competitive? It will at some point, as everything goes through in cycles.
MDC: One thing is for certain, the prices won’t come down.
PA: I know that is what people think but that’s not necessarily true. There are certain sectors in which probably it won’t come down, like auto insurance.
MDC: Auto insurance rates are set based on many details, including the region in which we live in. It seems to me that fraudulent claims are the biggest issue concerning auto insurance rates.
PA: Fraud has always been a problem in our industry, it’s one of those things that will never go away, we just try to control it as much as we can. We have all heard about the repair shop that did unnecessary repairs and as much as the industry tries to implement new systems to mitigate that as much as possible, it will always be there. You just try to deal with it the best way you can.
Regarding the premiums… let’s face it, we are in a big city. No system is completely perfect. Over my time, I’ve seen different systems come and go, we are always trying to come up with a better system that makes it fairer for everyone in general, but we will never find that perfect system.
A few years ago, we moved to the postal code and again, some things fall through the cracks. We had cases were the postal code across the street is different, so we could have the same vehicle and same driving record, but since the postal code is different from my neighbor across the street, one of us will be paying more. How do you fix that? They have to draw the line in the sand somewhere. Every time we tried to come up with a better plan there always going to be something.
MDC: How do you see the future in the insurance business?
PA: What I would like to say is that this too shall pass. There will be this correction that will go on for a little while, hopefully it won’t last very long and things can be back to normal. Even though we don’t know what back to normal will be once the pandemic is over.
Stay the course, try to be patient, I know it hurts right now because people aren’t working and still have to pay their premiums. I would say to work with your broker, see if there are any discounts or anything that you may be able to qualify in order to bring those premiums down. If you have two cars and you really don’t need both, maybe take road coverage off of one and reduce your premiums. No one’s got the magic formula.
Peter, thank you for being with us and providing us timely information. The insurance business is very complex. Choose someone who will represent your interests, that is as important as getting a good coverage, to get the best price the broker as to work for it.
Transcrição: Inês Carpinteiro