How Geography Impacts Insurance Industry in Canada

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How Geography Impacts Insurance Industry in Canada

By: Gia Nhi Long
Student #: 500208078
Professor: Steven Farber
Course: Regional Analysis of Canada
Course Code: GEO505-011
Date: November 21, 2010
Insurance is a form of risk management primarily used to protect against the risk of the contingent, uncertain loss. Insurance is defined as the equitable transfer of the risk of a loss, from one entity to another, in exchange for payment (Wikipedia). Insurance is important to everyone in Canada and also in the world. Insurance is to ensure that everyone life/property is protected from uncertain loss. There are lots of factor that can affect insurance affordability and availability in someway. The physical and human characteristics are one of the factors. Canada is divided into six regions, each region has its characteristic that can be differentiate from other regions (Bone). Insurance in each region is different according to their characteristic. There are many kinds of insurance, these include: crop insurance, flood insurance, auto insurance, life insurance, and health insurance. Physical characteristic like climate change can be one of the greatest impacts on insurance because if floods occur in Canada, they would destroy all the crops that have been growing by farmers, thus, insurance can provide these farmers with protection to the loss from these extraordinary events. Human characteristic can also affects insurance because human activities similar to pollution will affect the health of individual that can lead to higher insurance rate on life/health insurance. There are many social tensions that lead to different insurance rate for different people. These tensions include youths and elders, sick and healthy citizens. These tensions can greatly apply to auto, and life insurance. In this essay, the impact of geography of Canada on insurance industry, and the faultlines that arise from insurance will be discussed. Human/Physical Geography

The greatest strategic threat facing the insurance industry is climate change. In present-day, global warming is a big issue in Canada and the world, it does not only affect nature but as well as affect personal health. As a result of personal health and natural phenomena, they both affect insurance. “Global warming causes changes in weather patterns and shifts the underlying probability of insured loss from floods, wind storms and other phenomena. Climate change also affects pricing structures, reserving policies, solvency and corporate viability, as well as more gradual consequences like increased health problems.” The rising cost from catastrophic events similar to changing weather patterns, terrorist attacks pandemics are primary concerns could impact insurers’ earnings and capital (ERNST & YOUNG). “Present-day impacts of weather events on financial services are caused mainly by extreme events. Differences in vulnerability exist, caused by geographical location, population distribution, and national wealth. (Berz)” Especially in Canada, some regions are cooler than other regions, hence, their climate will also be different. In Canada, the biggest insurance payout is related to catastrophic events. Floods are most common in British Columbia, Ontario, Quebec, and Maritimes (Sandink).

“During the winter, the Arctic air masses often dominate weather conditions in the Prairies, placing the region in an Arctic ‘deep freeze’. A combination of strong winds and sub-zero temperatures can produce blizzard-like weather. (Bone)” Droughts are common and floods are second common natural phenomenon in the prairie ecosystem. In Central/Western Alberta, natural disasters such as hails, droughts, and floods could have great impact on farming, and insurance claim on crops are very high (Sandink).

The following bar graph illustrates the geographical and weather related disasters in 1960s to 1990s in Canada (Sandink).

As for human characteristics, we create...
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