The members who attended the Insurance Bureau of Canada’s annual general meeting yesterday, Dec.1, heard President and CEO Stan Griffin describe a difficult year for the country’s insurers, followed by outgoing Chairman Bob Cooke’s insights on what challenges the industry facesin the new year.
Griffin prefaced his remarks with an analogy to the Chinese symbol for the word “crisis,” which is written with two brush strokes: one stands for danger; the other for opportunity. “I think it’s an eloquent reminder that a crisis can yield positive results if properly handled,” he stated. “We certainly faced a crisis last year, struggling with one of the hardest markets in history.
“Claims costs were skyrocketing and underwriting rules were tightened as a result. Consumers experienced price shock and availability issues, and governments were pressured to find solutions. Publicly, we had few allies. The financial health of our industry was threatened, and in one province, our very existence hung in the balance.
“However,” he continued, “in these dangers we saw the opportunities, and seized them. In doing so, we helped to change the insurance landscape in several provinces, resulting in positive changes for our industry and our consumers.”
He then discussed in detail some of the more critical problems Canada’s auto insurance industry faced this year. Nearly every Province was affected to a greater or lesser extent. A summary of his discussion is as follows:
— New Brunswick faced the biggest, where the effects of the hard market were particularly harsh, and drivers were so outraged they pressed the provincial government to take over coverage. The IBC reacted with a “five-point plan” to resolve the issue and reduce premiums, which was successful. “On June 29, the government decided in favour of private industry, bringing in reforms that preserved our right to do business and New Brunswickers’ right to competition and choice.”
— In Nova Scotia a cap on pain and suffering awards for minor injuries was implemented, but “debate on the definition of a minor injury, as well as the removal of age and marital status as rating variables has threatened potential savings to consumers. Recent insurer filings in Nova Scotia show that rates have been reduced only marginally.”
— In Newfoundland and Labrador, the battle for a fair and sustainable auto insurance market continues to unfold. Bill 30’s limited reforms did not go nearly far enough to reduce industry costs; its centerpiece was a $2,500 (U.S. $2100) deductible on pain and suffering awards for minor injuries, which promises very little in terms of savings.
— In the west, Alberta implemented complicated reforms this fall that unfortunately mean good drivers are subsidizing bad ones. While young males will see the largest drop in rates, good drivers see only a small reduction. IBC worked with the Alberta brokers’ association to lead a massive communications and training effort to ensure that the reforms were implemented as smoothly as possible.
— Progress on auto insurance reform has been especially heartening in the key market of Ontario. Multi-million dollar losses in the preceding three years have now been replaced by healthy returns for our member companies. At the same time, consumers are benefiting from an average 12 per-cent reduction in premiums. There are also now 140,000 fewer vehicles insured by Facility Association in Ontario versus a year ago.
Griffin then addressed another crisis, the loss of consumer confidence in the industry, and the fallout in Canada from New York Attorney General Eliot Spitzer’s investigations. Many Canadians have reacted to the industry’s financial recovery, after years of anemic returns, with numerous protests over premium increases.
Spitzer’s probe also affected Canada. “The long accepted and regulated practice of offering contingent commissions has come under public fire,” Griffin noted. “There is now a heightened urgency for transparency in all our dealings. I’m pleased to say that our recently announced Code of Consumer Rights and Responsibilities and Industry Commitment to Website Consumer Disclosure will go a long way to reaffirm our integrity to government and consumers,” he continued.
“Our industry made it through an extremely tough year: getting through the hard market, managing the difficult process of reform in many areas of the country, and saving our very existence in New Brunswick. The crisis didn’t kill us, so to speak, and as an industry we are heading into the new year much stronger and wiser for it,” he said in closing.
Robert J. Cooke, senior vice president, State Farm Insurance Companies, then told IBC members that “moving forward it is important that we all, and I use the words ‘we’ collectively to mean, our government, our regulators, and our industry, that we, remember this recent period of crisis, and more importantly how we got there. Moving forward it is important that we each accept our roles and responsibilities as we collectively do our best to minimize the insurance cycles which, given history are certain to revisit us again.”
He reminded his audience: “Insurance is a very complex product, impacted by a host of changing and emerging variables and requires our ongoing attention to the trends, the recommendations and the actions we can take to protect the consumers demand for balance in the cost versus benefits proposition. This last period of crisis has been an example of our lack of combined will and focus, to make changes in advance of a period of crisis, a state of affairs we must learn to avoid moving forward.
“So a key priority for us remains the ongoing educational and management of our products within this circle of the collective ‘we’. IBC ‘s efforts in co-operation with government and the regulators to insure we manage the consumers demand for available price versus benefit balanced, products is an important part of our work moving forward.”
Cooke also noted that the industry bears a responsibility to help victims of natural and human disaster, and that its interest in maintaining profitability needs to be balanced with a consideration for its customers, Canada’s consumers.
As repeated crises occur it deepens the industry’s responsibility towards those consumers. “Restoring our own customers sense of confidence and trust in our industry,” should be a primary goal Cooke said. “While our service to our customers, at the time they need us most, has never been in question, the debates and criticism on price, delivery and availability issues arising out of a hardened market, in part fueled by the press and by various political agendas has left us with a damaged public image,” he continued.
“Recent events in the United States have done little to help our case, even though there is absolutely no evidence of these actions occurring within our industry here in Canada,” he added. “That issue however took its proverbial spin to land on compensation and contingent commissions.
“As an industry, however, we can be proud of the voluntary action taken by our members and their distribution partners. The code of consumer rights and responsibilities as well as the voluntary compensation disclosure are significant indications of our desire to demonstrate our transparency, and our effort to seriously regain the confidence of our customers, with regard to an issue that is commonplace in the sale of almost every product, not just our own. This issue of customer confidence is a matter we are taking very seriously within the industry, and through our trade association, IBC, we have set the theme of Restoring Consumer Confidence as one of our key priorities for the foreseeable future.”
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