The modern insurance industry has operated under the same model for centuries: taking on other people’s risks for a fee, covering their losses if things go wrong.
Rob Wesseling, however, thinks that model is unsustainable in an increasingly risky world.
The president and CEO of Co-operators says policy premiums will keep rising as coverage of losses continues to decline — unless more is done to mitigate damages caused by climate change.
Instead of just “indemnity” — or recouping customer losses — he believes the industry needs to address climate-related risks head-on by helping customers become more resilient.
“Having great indemnity products that people can’t afford isn’t a great solution, so we need to do more than that,” he says. “Traditional insurance products will still be necessary, but I believe we need to also help individuals, businesses and communities reduce the risks they’re exposed to.”
Wesseling also believes Co-operators, which has operated on a co-op business model since its inception more than 80-years ago, is in a unique position to provide solutions. That model — emerging from the ashes of the Great Depression — is designed to share risks and rewards equally among its members, who are typically the business’s primary customers.
Co-operators is similarly owned and governed by its 45 member organizations, which include credit unions, farm co-ops, and retail, housing, education, health care and other co-operatives.
The Cambridge native graduated with an MA in statistics from the University of Guelph in 1995, and began his career at a major bank in Toronto. Growing frustrated by the commute, he joined the Guelph-based insurance and investment group in 1997 as a programmer-analyst, rising through the ranks to become president and CEO in 2016.
Rather than just covering losses, Co-operators’ mission is to “enable the financial security of Canadians and Canadian communities,” according to Wesseling, who was recently honoured with the Peter ter Weeme Purpose Economy Champion Award for advancing social purpose within business and financial systems in Canada. “I’d like to think the original founders would be pleased with that.”
Co-operators insures about 1.7 million vehicles, 965,000 homes, 635,000 lives, 326,000 businesses and 44,000 farms in Canada. The company also employs 7,000 Canadians directly and supports 2,500 staff across its network of independent exclusive advisers from coast-to-coast.
The Star recently spoke to Wesseling from the Co-operators headquarters in Guelph about the growing risks Canadians face from global warming, why traditional insurance is insufficient in this moment, and why its 80-year-old co-operative model has never been more relevant.
What inspired you to join Co-operators in 1997?
I was taking a two-hour bus from my home in Guelph to downtown Toronto every day to work for one of the big banks, and the bus station was directly across from the Co-operators head office.
I knew I could do the same work I was doing in Toronto at Co-operators, so I went one day with a job posting I had picked up from the university, and asked the security guard if he would share my resume with the hiring manager.
In typical Co-operators fashion the security guard called the hiring manager down to speak with me. We spent 20 minutes talking in the lobby, and a week and a half later I was an employee.
What has kept you there since?
I joined as a programmer analyst, and one of my first jobs back then was to reach out to clients in Manitoba that were at a significant risk of being flooded to see if they wanted to purchase coverage. I remember going to my boss — the same gentleman who met me in the lobby — and asked him why we would do this, because it was going to cost us a great deal.
It was one of those, “why don’t you have a seat, son?” moments, and he explained to me that we existed to protect the financial security of our constituents. Giving them the opportunity to purchase that coverage was us fulfilling our purpose.
That’s what I consider my Co-operators origin story, because from that moment on, it was clear to me why I was getting up every morning.
How did you go from entry level to CEO in under 20 years?
My predecessor started in the mailroom, so it’s quite common for staff to get opportunities to advance quickly.
When I was still a programmer analyst I applied for a director-level role that, in retrospect, I probably wasn’t qualified for, but I ended up getting it and quickly moved into middle management.
I worked my tail off for the next couple of years and was moved quite quickly through product roles, underwriting roles, and in 2002 I was appointed vice-president of our home and auto business lines.
I had a brief stint as chief information officer in 2006, and six months later I was asked to lead one of our property and casualty businesses, Sovereign General. That role was expanded to include all our property and casualty businesses in 2011, and I was in that role until I was appointed CEO in 2016.
Why is the co-operative model a good fit for the insurance industry?
The whole concept of insurance is, individuals pool their money together, and those funds are shared back when unpredictable losses occur.
The concept aligns well with co-operative values: care for community, open membership, and in our case, enabling financial security. I think it’s one of the most suitable businesses for a co-operative or mutual model, because it’s about sharing premiums and losses with others.
Roughly 26 per cent of the global insurance industry is made up of co-operatives and mutuals, and that segment has been outgrowing other structures for an extended period.
To what do you attribute that growth?
The insurance industry has been focused on indemnity — helping people recoup financial losses — for most of its existence, and that’s critical. The co-operative and mutual sector, however, views the business as bigger than indemnity.
It’s about resilience and loss prevention. It’s about creating products and services that will enable individuals, businesses and communities to absorb the impact of disasters with less damage and reduce loss of life.
How does Co-operators do that?
We launched a product called Tomorrow Strong, which is now part of eligible Co-operators homeowners’ and farm policies, and it’s designed to reinforce homes in hazard areas.
If, for example, you live in east Calgary and you have an asphalt roof that’s destroyed by hail, we will pay extra to put in a hail resistant roof, so the next hailstorm doesn’t destroy it. If you live in a flood zone, we will pay extra to harden the exterior of your home after a loss.
We’re also the only insurer in Canada that offers comprehensive flood insurance ubiquitously. Any Canadian homeowner can get flood insurance from Co-operators. We did that because flooding is the most frequent physical risk Canadian families are exposed to, and about 740,000 Canadians have signed up.
As for our investment assets, 21 per cent are allocated to climate solutions, 53 per cent are impact or on a net-zero pathway, and we’re committed to getting that to 60 per cent by 2030.
The Impact Fixed Income Fund that Co-operators helped seed seven years ago has outperformed its benchmark by 67 basis points, so it’s not just about building resilience — it’s also good business.
What are some of the primary climate risks in Canada?
About 94 per cent of Canadians who live in a flood zone don’t know they live in a flood zone, and 74 per cent who live in a high-risk area don’t think they’re vulnerable, either.
It’s similar for forest fires and severe storms; Canadians really don’t understand the risks that they’re exposed to, and that’s problematic.
It’s difficult to act if you don’t know how important those actions are.
Anyone can go to our website, type in their postal code, and can get an assessment of their flood risk, and I encourage people to do that. If they are at high risk, there are steps they can take to reduce it.
Is traditional property insurance sustainable?
It’s a very difficult path to navigate as the risks outpace growth in the economy.
Traditional insurance products will still be necessary, but I believe we need to expand that focus to helping individuals, businesses and communities reduce the risks that they’re exposed using our expertise as the country’s risk managers.
If you look across the border there’s real challenges in states like California, Florida and the Appalachias, where significant disasters have occurred and it’s increasingly difficult for individuals in those areas to get coverage. I absolutely don’t want to see that in Canada, and I believe we have time to reduce the likelihood of it happening.
When I talk to our climate scientists, they say we’re about 20 years behind those areas. A lot can be done in 20 years in terms of changing the way the industry works so that it’s ready to respond, while changing the way governments protect homes, businesses and critical infrastructure.
Is the co-operative model itself sustainable?
I believe strongly that purpose-driven businesses, like co-operatives, are more important now than at any point in history because of the economic, climate and social risks we face.
We launched the resilience acceleration lab to demonstrate the need and viability for private capital to finance urgently needed climate resilience in Canada.
We’re convening investment opportunities with partners at all levels of government — as well as finance, adaptation, policy and system-wide partners — to create a marketplace so that others can invest in them as well.
We’re putting our money where our mouth is to try and solve this problem and help protect Canadian communities. This is our time to make a significant impact on behalf of our constituents, and on behalf of Canadians.
