Citified's Ten on the 10th is a monthly question-and-answer segment connecting our readers with the insight and knowledge of Victoria's top real-estate and business professionals.
March's Ten on the 10th features Luke Mills, Account Executive at Megson FitzPatrick Insurance (MFI), a Victoria-based insurance brokerage.
Asking the questions is Ross Marshall, Senior Vice President of the Victoria offices of commercial real-estate brokerage CBRE
. As a leader in facilitating large-scale commercial real-estate transactions throughout the Capital Region – which include apartment complexes, industrial retail and office properties, and land/development opportunities – Ross and his team are at the forefront of market-leading real-estate transactions on Vancouver Island.
How did you get into the insurance brokerage industry?
I began my insurance career in Toronto in the mid-1990’s at a small family brokerage founded by my hero, Christie Mills (my mom). Her relentless commitment to her clients inspires me to this day.
When I moved to Victoria in 2001 and was introduced to MFI, I was immediately struck by the positive culture, quality of people and the same client-centric philosophy I was taught. I knew I had found a new home. I started on the MFI motorcycle insurance team in 2002, moved into the business division that same year, and was fortunate to be invited into partnership in 2008.
Can you give us a brief rundown of MFI?
MFI is a local, full service, independent insurance broker. Founded by Michael Megson and David FitzPatrick in 1968, we celebrated our 50th anniversary late last year. Today, we have a team of over 100 talented people.
Approximately half of our team work in the world of business (AKA commercial) insurance; this includes commercial marine, surety bonding and commercial fleets. The balance of our team provide home, auto, motorcycle, personal marine, benefits and life insurance solutions.
Three years ago we partnered with the Roger Insurance Group to expand our capabilities across Canada. More recently we engaged with a partner called Globex International to help us better serve clients with operations or assets outside of Canada.
Selling insurance is also an opportunity to educate your clients. Can you touch on that?
Our customer service philosophy is to Educate, Advocate and Build Loyalty. When applied to business insurance this means; Educate our clients about risk and what tools (insurance or otherwise) are available to manage them; advocate on their behalf when dealing with underwriters, claims adjusters, etc., and build loyalty by going the extra mile to make people’s lives easier.
We have risk specialists to help our clients identify potential problems and strive to avoid claims. When claims do occur, we have a dedicated in-house claims team who go to bat to help ensure a fair process and settlement.
What is the current state of the insurance industry in British Columbia?
The business insurance market in BC has been relatively “soft” for the past several years. In our industry, a “soft” market is characterized by competitive pricing, broad coverage and relatively flexible underwriting. The opposite of a soft market is a “hard” market, characterized by reduced competition, higher premium rates and stricter underwriting. These are natural cycles in our industry and there are signs that we are in the midst of a transition from “soft” to “hard”. There are many contributing factors but, in a nutshell, when insurance companies are paying out more in claims and expenses than they collect in premiums, change is inevitable. These changes could be modest and incremental for properties and businesses with sound risk management practices and a good claims record, or more severe and sustained where the opposite is true.
Can you elaborate more on the transition between 'soft' and 'hard' markets, and how that relates to construction?
The hardening market will be felt more acutely in certain industries than others, in part because those industries have experienced falling rates for several years and diminishing profitability. In terms of construction, many insurance companies are scaling back the amount of wood frame risk they are willing to underwrite due to fire exposure. This means that larger wood frame projects are likely to experience higher premiums, deductibles and tighter warranties or conditions.
When it comes to multi-family buildings, what is the dominant cause of loss?
Water damage losses continue to be the single greatest cause of loss when it comes to multi-unit residential buildings. We expect to see rising premium rates and deductibles, especially for properties that have experienced frequent and/or severe claims. Insurers may also look more carefully at the age and condition of buildings and how well they are managed and maintained.
What about the rising cost of construction? Does that affect insurance premiums?
Absolutely. Rising construction costs will continue to contribute to higher premiums as damaged property costs more to repair or replace.
What are factors affect local insurance premiums?
Throughout much of BC, including on Vancouver Island, we have exposure to potentially catastrophic losses such as earthquakes, tsunamis and wildfires, which increasingly figure into Insurers premium calculations
And as society becomes more litigious we are also seeing an increase in the frequency and cost of liability claims of the slip, trip and fall variety.
What are you currently monitoring in terms of emerging trends?
Environmental exposures related to brownfield development and hazardous material remediation are an increasingly prevalent theme, as is an increase in liability claims associated with building in our densifying community as construction activity impacts adjacent properties.
Harassment, discrimination and other human rights-related lawsuits are also on the rise, and with technology playing an increasing role in the real-estate and development industries, there are also risks related to the failure of that technology, as well as escalating cyber-crime and privacy concerns.
If you had to give an individual one key tip, what would it be?
At the end of the day, insurance is only part of a sound risk management program. We strongly recommend that you work with your broker and other strategic partners to identify, prevent and mitigate risk. It will protect your business and help your broker ensure the best outcome when negotiating your insurance program. C
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