The impact of the pandemic on Auto claims

COVID-19 changed Canadians’ commuting experience, and fewer cars on the road in April and May meant fewer collisions. As people drove less and driving behaviours changed, trends in Auto claims demonstrated a decrease year over year.

While the frequency of Auto claims was down overall in 2020, we experienced challenges in our injury claims portfolio causing an increase in unfavourable claims development. In addition, delays in treatment, medical assessments, litigation and dispute resolution processes as well as increased legal involvement will impact future injury claims costs.

In 2020, we set aside more than $35.0 million in direct relief measures through our Reduced Driving Refund, which provided a 15 per cent refund on eligible auto premiums paid between April 1 to May 31, with sign-up ending in December. As at December 31, 2020, $20.3 million in direct relief was returned to eligible policyholders who registered for the refund. The remaining unclaimed Reduced Driving Refunds were reinvested into communities across Canada, prioritizing the support of vulnerable and marginalized Canadians experiencing increased financial and social challenges in these uncertain times.

The Reduced Driving Refund was one of many initiatives and actions we took to provide financial relief for our clients throughout the COVID-19 crisis. The Reduced Driving Refund was an initiative offered to all eligible clients, including those who also elected to change their policies to reflect their new commuting habits.

Financial relief for Canadians in challenging times

Through the height of the pandemic and beyond, we focused on supporting clients. While situations were unique and dynamic, many clients faced financial and social disruption of their daily lives during the pandemic. We offered a range of flexible options available for clients who encountered financial difficulty, including:

The Co-operators Reduced Driving Refund

We offered a 15 per cent Reduced Driving Refund to all eligible Auto clients for the months of April and May to pass the benefit of claims reductions onto our clients, for which we set aside over $35 million. By year end, $20.3 million of client premiums was returned to eligible policyholders who registered for the refund.

The additional $15 million in unclaimed Reduced Driving Refunds was redistributed to Canadian charitable organizations supporting community relief and recovery for vulnerable and marginalized Canadians impacted by the pandemic.

Flexible payment options to ease financial pressures

Clients experiencing financial difficulties were encouraged to consult with their Financial Advisors, who offered a range of options, including payment deferral and extended payment grace periods during the crisis, and forgiveness of insufficient fund fees.

Premium relief across multiple business lines

Because driving habits changed, our clients could temporarily change their commuting status and remove vehicles from the road to reduce their premiums. We also made changes to ease the burden of seasonal property owners facing travel or social distancing restrictions, including removing some of the conditions around coverage for unoccupied properties.

Improving community resilience through co-operative support

From food production, to retail services, affordable housing, financial services and more, Canadian co-operatives enrich our communities with services and solutions that build collective resilience. We helped co-operatives pivot in response to a rapidly changing economy, so they could continue meeting the needs of their communities.

$1 million in capital to drive co-operative innovation

Through Co-operators Community Funds, The Co-operators reinforced ongoing co-operative sector support by making $1 million in capital available through the launch of its Co-op Impact Program. The program supports small- and medium-sized co-operatives adapting to a shifting economic landscape in the wake of the COVID-19 pandemic. Through the Co-op Impact Program, low interest loans between $40,000 to $100,000 are available to individual co-operatives whose new or existing project-based initiatives are supporting their efforts to thrive in the COVID-19 environment.

COVID-19 relief funding for Canadian co-operatives

In support of Canada’s co-operative sector, The Co-operators announced a $220,000 COVID-19 Co-operative Assistance Fund to provide provincial co-operative associations with access to financial support (to a maximum of $20,000). This funding support went towards education, safety, advocacy and guidance to enable the pivot of services for their membership and strengthen their financial stability in the wake of the pandemic.

Investing our financial strength into communities for pandemic relief and recovery

In 2020, The Co-operators provided funding for Canadian youth and marginalized communities, as many struggled with mental health issues and financial insecurity related to COVID-19. In addition to our ongoing annual support through a variety of partnerships to improve community well-being, we contributed $17.4 million in COVID-19-related relief.

United Way Centraide - $7.7 million donated*

To help ensure that Canadians who are most vulnerable and impacted by COVID-19 had adequate support, we contributed $7.7 million to local United Way Centraides across the country.

Co-operators Community Funds - $7.5 million for COVID-19 recovery*

To further support the long-term pandemic recovery and community resilience, we contributed $7.5 million to the Co-operators Community Funds, a charitable foundation with a mission to support initiatives that lead to job creation and/or enhanced employability for marginalized youth and individuals with mental health challenges.

Co-operators Community Funds - $2 million Pathways to Employability Initiative

$2 million was dedicated to launching the Pathways to Employability Initiative to support marginalized Canadian youth who have lost jobs or educational opportunities due to COVID-19 shutdowns.

Kids Help Phone ($150,000 in additional funding)

The Co-operators is a founding partner of the Crisis Text Line powered by Kids Help Phone, which provides youth with a confidential, 24/7 texting service. We provided $150,000, to support hiring more counsellors and volunteer crisis responders to handle the increased demand for texting support due to COVID-19. Kids Help Phone is Canada’s only 24/7 national service offering professional counselling, information, referrals, and volunteer led, text-based support for young people.

Boys & Girls Clubs of Canada

$50,000 in relief funding was redirected to help Boys and Girls Clubs of Canada (BGCC) provide emergency support for its members, families and affected communities through no-contact food drops, drive-through food banks, crisis hotlines, meals and accommodations. Since 1900, BGCC has opened their doors to children, youth and families, providing vital programs and services to over 200,000 young people in 700 communities across Canada. This funding was committed for 2020 in advance of the pandemic.

Enactus Canada ($20,000 in additional funding)

The Co-operators partnership with Enactus Canada focuses on enhancing the mental health of post-secondary students, while providing the opportunity for them to do the same in their communities. We provided $20,000 in funding to launch a summer Grant Program to address mental health resiliency.

*For both the United Way and Co-operators Community Funds, $7.5 million in funding was derived from unclaimed Reduced Driving Refunds in 2020.

Maintaining our capital strength

In the spring of 2020, we acted quickly in areas of governance, risk, operations and investing, and took management action to ensure our capital position was maintained in times of uncertainty.

Management oversight

The Capital Oversight Committee was created, one of four new management oversight committees created as an initial response to the crisis, whose mandate was to ensure that The Co-operators capital remained strong, above both regulatory and internal minimums.

Risk management

We further enhanced our robust annual stress testing process in response to increased uncertainties as a result of the pandemic. Multiple stress scenarios were analyzed in 2020 to anticipate our capital resiliency, considering varying levels of economic and market recovery, government and regulatory interventions, and length and severity of the pandemic.

Scenario analysis

As part of our financial planning process, we enhanced our scenario planning analysis to ensure that our forward looking financial plans for growth and stability were flexible, robust and appropriate, given the increased uncertainty around economic recovery.

Fixed income investments

Further analysis was performed on our fixed income investment portfolio to model the impact of recessionary scenarios to ensure it remains resilient to market shocks.

Debt issuance

We issued $300 million in debt to strengthen our capital position, which provided a buffer to our capital and liquidity, and allowed us to redeploy capital as needed across the organization.

Invested asset portfolio

We performed a strategic recalibration of our P&C invested asset portfolio to reduce our exposure to common shares, further improving the resilience of our capital position and ensuring we maintained strong liquidity throughout the year.

Protecting the health and well-being of our people

In the days before widespread lockdowns were announced in Canada, we immediately moved our people to work-from-home environments, including employees, Financial Advisors, agency staff and call centre staff, to proactively ensure the health and safety of our employees, Financial Advisors, and our local communities. This included close to 8,000 people – an unprecedented move in our history.

We provided resources to navigate difficult times

Ongoing tips and resources were developed to support the mental and physical health of our employees and help them stay connected as we worked through this time of change together. These resources covered topics such as mental health, managing work at home, balancing work with educating children at home, and physical and financial health.

We made job security a priority throughout the pandemic

During the height of the crisis, we worked through our business continuity plans with a core staff and scaled our technological capacity to ensure all employees could work securely and seamlessly. At the same time, we continued to pay full wages to all employees, whether they were working during this period or not.

We increased employee spending accounts for wellness and home offices

To support the health and well-being of our employees working from home, and in response to the need for technology and office equipment, we enhanced our Personal Spending Account (PSA) for Wellness Expenses coverage by an additional $250 per employee, to a total of $500, to purchase home office equipment.

Designing flexible work arrangements

Recognizing the diversity of life situations, we worked with employees to identify flexible work arrangements that would support work-life balance and mental health, and address the unique circumstances caused by the pandemic. This ultimately led to better productivity and resilience among our employees, which meant we could ensure the needs of the business and our clients.

The future of work

Today’s workplace looks significantly different than it did one year ago. The COVID-19 pandemic led to an unprecedented shift away from in-person engagement. An expansion of online, remote and flexible work arrangements redefined boundaries between our homes and workplaces.

To ensure we kept employees and our communities healthy and safe, the vast majority of our employees worked from home throughout the year, with over 90 per cent of our corporate employees still working at home at year end. A small subset of employees who were required to be in the office due to the nature of their roles were provided a safe and isolated work environment by maintaining virtual work for the majority of employees. As regional public health restrictions eased, offices were prepared to welcome employees, up to 25 per cent capacity, to a safe, socially distanced work environment.

With the rise of virtual work, we continue to explore how we can embed and embody a strong workplace culture in our day-to-day activities and interactions. As we learn from challenges and identify opportunities presented by the new working reality, we are reimagining the future of work at The Co-operators.

While 2020 was broadly defined by its challenges, great benefits emerged in terms of our ability to work with greater flexibility and enhance our culture of performance, innovation, diversity and inclusion. These opportunities enable us to continue with a growth mindset and build a better workplace.

Expanding online, remote work for the long term

As conditions allow, more employees, Financial Advisors and client-facing staff will return to the office. At the same time, increased comfort and capability to work remotely will lead to an increase in remote work going forward. Remote work not only reduces the impact of our physical operations in terms of energy, emissions and travel expenses; it affords greater flexibility for our people and opens us up to a wider, more diverse pool of talent who may not live in close proximity to our corporate locations.

Accelerating business transformation and performance culture

The pandemic has also introduced an increased urgency for businesses to evolve. Our competitors and consumer expectations will continue to evolve at a pace well beyond what we experienced prior to the pandemic. We must be positioned to evolve at pace. The goals in our strategic plan to transform our organization digitally require us to ensure our workforce is poised to embrace the speed of change required to meet this challenge.

Flexibility and adaptability as a core strength

In the early days of the COVID-19 pandemic, the need to adapt and stay flexible in response to the rapid pace of change became a valued competency. Understanding that a one-size-fits-all approach does not do well to serve the needs of the business nor the health and well-being of the worker, we are committed to moving forward with a culture of flexibility – ensuring our people remain strong and ready to respond as challenges arise.

Achieving high performance through positive mental health

With the current pace of change, we will increasingly need our people to operate with a bias towards action. Especially in challenging times, to ensure the needs of our clients and communities are met, we must work at pace and be ready for change and stay focused on outcomes. To be successful, we must promote positive mental health and set up conditions that put the well-being of our people first. This will ensure employees have the emotional and practical tools they need to perform.