Conversations brokers can expect to have with their clients after ‘The Big One’

Brokers in B.C. should prepare to tell most of their clients some bad news if a major earthquake were to hit the province over the next 24 hours, a catastrophe researcher tells brokers attending the Insurance Brokers Association of B.C. AGM and Leadership Conference on June 11.

“Think now, what are you going to say to your policy holders?” asks Paul Kovacs, founder and executive director of the Institute for Catastrophic Loss Reduction (ICLR). “You are there for them. This is coming. I don’t know whether it’s today or when it’s going to come. There will be a really bad earthquake. Different ones could happen. Have you thought about what it is you’re going to do for your policyholders?

“Don’t do it in the moment. Start thinking about it now. Some of those conversations are really, really different. The product we have right now, I’m really uncomfortable with. You’ve got most people not getting any help from the product.”

Only 8% of earthquake policyholders in B.C. would experience damage high enough to trigger a significant claims payment under their home insurance policies, Kovacs says, citing recent quake risk modelling conducted by ICLR.

In the other 92% of cases, there would either be little damage, no insurance coverage purchased, or the claim damage would fall within the province’s high insurance policy deductibles for quake.

Based on the modelling data, Kovacs characterizes three different types of conversations brokers can expect to have with clients after an earthquake. In all of them, the client isn’t receiving an insurance cheque to cover earthquake losses.

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First, clients may not be “getting any help [from earthquake insurance] because they have no loss. I can live with that, that’s okay,” as Kovacs says.

Second, the client may be told he or she is not getting any help because they are outside or excluded from coverage. “That’s really uncomfortable” for the broker to have that conversation with the client, he adds.

And third, “I’m not getting any help because I’ve got coverage, but I’ve got this great, big deductible,” as Kovacs frames the client’s perspective. “That’s uncomfortable.

“So, these conversations are on their way…How are you going to play your role?”

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Ready to talk?

Kovacs asked brokers in the audience if they are prepared to have these conversations with clients after the proverbial ‘Big One’ hits B.C. The phrase commonly refers to a potential Magnitude 9.0 earthquake originating from the Cascadia Subduction Zone.

ICLR modelled a number of different earthquake scenarios, postulating a quake happening under Vancouver’s City Hall.

A Magnitude 6.0 quake in that location would cause an estimated $10 billion of insured damage, which would be the most insured damage in Canada’s history, Kovacs says.

At Magnitude 7.5, which is what the City of Vancouver is planning for, Canada could well be looking at $100 billion in damage, both insured and uninsured, when you factor in damage to the buildings, fire following losses (which are covered by insurance in B.C.), and other types of losses.

But ICLR’s modelling does not include expected losses from liquefaction, landslides, tsunamis, post-event inflation or indirect losses, none of which are insured.

Who’s insured?

In 28% of cases, ICLR’s data show, B.C. policyholders may call their brokers to report moderate or high quake damage for which there is no coverage under their insurance policies.

A further 55% to 60% of homeowners in the Vancouver area may call their brokers to report damage, but not receive an insurance payout for it. In these situations, Kovacs says, the policyholders can see the damage, such as cracks in the building, “but our models say the damage is probably not more than the deductible.”  

Policy deductibles for a B.C. quake can be as high as between 10% to 20%. With the average price of a Vancouver detached home being just over $2 million, according to a January 2025 study by Vancity bank, that would put a quake deductible for the average homeowner anywhere between $200,000 to $400,000.

And about 40% of calls brokers receive from clients after a quake disaster may be from homeowners who did not purchase earthquake coverage.

“The end of [that] conversation is, ‘I can see the damage. And yes, you have a policy with us. But we didn’t have earthquake coverage,” Kovacs says, assuming the role of the broker. “You’ve lost your home. You’ve lost everything. But you’re not getting any help from your insurance, because you didn’t buy coverage.”

To brokers at the panel session, he asks: “Are you ready to have that conversation? That’s a tough conversation.”

Keep in mind, Kovacs adds, these conversations will go on for a long time after the earthquake event. For example, repairs to quake losses in Christchurch, New Zealand, which was hit by a Magnitude 6.3 earthquake in February 2011, are still underway.

“When I went down to Christchurch for the five-year anniversary, when I went down for the 10-year anniversary, this is a community that was rebuilding incredibly slowly, Kovacs says. “In Christchurch, there is a plan. But for Vancouver, this is [modelled] in a part of Vancouver where we expect [it to be closed] for three or five years. No one can go into this part of Vancouver because the damage will be so bad and so dangerous for years. That’s what Christchurch did.”

David Gambrill

David has twice served as Canadian Underwriter’s senior editor, both from 2005 to 2012, and again from 2017 to the present.