IIBAA Conference 2002: Ahead of the Curve

Alberta’s brokers have been caught in transition recently, facing the implementation of a new Insurance Act as well as the current hard pricing market. At the recent annual conference of the Independent Insurance Brokers Association of Alberta (IIBAA) in Edmonton, these changes dominated much of the conversation.

Addressing the association’s AGM, new insurance superintendent Dennis Gartner says that the first part of the Insurance Act revisions already in place “at first blush seem to be doing a good job”. However, he adds, more change is in the offing, with a second set of revisions under discussion. “We will be coming back to the trough” to get input from brokers on these changes, including such things as auto insurance contract provisions, he says.

Outgoing president John Rigby notes that in his first week in office the new Act became law and was a large part of the association’s work last year. Rigby was also involved in lobby efforts on Parliament Hill. Notes Insurance Brokers Association of Canada (IBAC) president Ginny Bannerman, Rigby was just recently able to secure meetings with both the prime minister and Tory leader Joe Clarke. “It certainly helped to raise our profile,” she observes.

Bannerman adds that brokers will be dealing with a new face on Parliament Hill given the cabinet shuffle that took place the day prior to the Alberta AGM. She is confident that the national association will have a closer relationship with new junior finance minister Maurizio Bevilacqua than with his predecessor, John McCallum.

Another focus for Rigby last year was the CSIO portal, a crusade which will be continued, says incoming president Alan Jones. Professional development will also be a focus, with Jones an active member of the IBAC committee implementing the senior CPIB designation.

HEAD-ON APPROACH

Perhaps the main issue on the table is the challenging auto market. Jones says it will be a priority in the year ahead, with a new committee, headed by former IIBAA president Rob Clarke, looking at all the issues.

Gartner notes that “the current auto situation is not sustainable”. At a recent meeting of the Canadian Council of Insurance Regulators (CCIR), the Insurance Bureau of Canada (IBC) made its case to regulators on changes needed to bring profitability back to auto insurance. “If the current [claims] payouts continue, rates are going to skyrocket to a level that the consuming public isn’t going to tolerate.”

Although Gartner reports little negative feedback from this year’s premium increases, he expects that consumers will reach a breaking point if the increases continue into next year.

The new IIBAA committee will specifically look at issues such as tort reform, says Clarke. The province’s insurers are facing escalating bodily injury claims, especially for non-serious injuries, the cost of which could cause insurers to leave Alberta as they have Ontario and New Brunswick. “I don’t think we’re too far behind in Alberta,” Clarke tells delegates. He sees the industry in the “honeymoon” stage of rate increases, and moving into the “headache” stage.

SPECIAL BENEFITS

There are several issues plaguing the Alberta market, IBC regional vice president Jim Rivait said in an interview at the conference. Collateral and income benefits for accident victims are front and center. With accident victims eligible for 100% of income with no tax paid, “it serves as a disincentive for people to go back to work…who should ever believe that you should make more money for being off work.” He estimates that overcompensation for income and collateral benefits accounts for 9%-10% of premiums.

He adds that 15%-20% of premiums are going towards fraud costs, while another 6% – equal to $117 million – was lost due to auto theft.

Rivait says Alberta is not in as rough shape as Ontario or Atlantic Canada, one factor being the auto rate board’s willingness, by and large, to respond quickly and reasonably to requests for rate increases. Also, healthcare costs are better controlled in Alberta. For example, changes to the no-fault system, limiting some treatments and expanding others, seem to indicate politicians are listening to insurers. However, bodily injury does remain a problem. “I point to injury lawyers,” says Rivait, adding that some lawyers are willing to pay clients up front knowing that they will recoup compensation. The industry has seen “stacks of claims” where vehicle damage is less than $500, but the bodily injury claim is as high as $30,000.