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Explaining Subscription Policies


In the midst of an insurance market where insurers are less and less excited to write new policies, and where they are scaling down their capacity for existing business, we are seeing the need for more subscription policies to insure the increasing limits on property insurance policies.

What in the world is a subscription policy? In a nutshell, it is a policy where two or more insurance companies agree to rating and coverage, at a split percentage between the insurers, to total one hundred percent of the required limits.

In a non-insurance example – consider a scenario where you are asked by a friend to move a piano. If you show up by yourself with a truck and successfully navigate the piano from point A to point B with nothing going wrong, you are a hero. Your photo is displayed on a social media page, you are talked up by your friend to other friends, and before you know it, you are moving all of the pianos in the area as your reputation has made you the go-to celebrity piano mover in your circle of friends. However, it is all fun and games until you drop a piano, have another one slide off the truck, and then accidently go into the wrong house and move the wrong piano.

Instead of doing it yourself, the other solution is the age-old team lift scenario. This allows you to share the heavy lifting and the heroics with others. It also spreads out the risk with your friends if something goes terribly wrong with moving the piano.

Subscription insurance polices are similar to recruiting a few friends to help you move a piano. Instead of one insurer taking on all of the risk, they share the risk, along with the premium dollars collected, to reduce their exposure. If a subscription policy insured piano falls down the stairs, all insurers on the policy would pay for their portion of the loss, rather than being responsible for the entire amount.

We are in a unique insurance market, as we are seeing replacement cost values increasing as inflation runs rampant.  At the same time, we are seeing insurers pulling back capacity leading to more scenarios where subscription policies are required.

I want to share that while this isn’t always the ideal scenario, it is not a bad thing for consumers who end up in a situation with a subscription policy. This approach removes some of the volatility of the hard market and also provides a solution to make sure that adequate limits are in place. In a scenario where a claim occurs, it is often set up with one independent adjustor handling the claim on behalf of all of the insurers, rather than having each insurer sending an adjustor to the party.

Have further questions on subscription policies? Feel free to reach out. Looking for a friend to help you move a piano?  I know a guy that I can refer you to!

Be sure to seek advice and purchase insurance from those who understand your business!

David Schmidt is an Account Executive and Rempel Insurance Brokers in Morris, MB, specializing in insuring farms and businesses across Manitoba and Saskatchewan. 

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