Industry Prepares for Release of 2004 Yearend Results

The insurance industry is already preparing to better handle the release of 2004 yearend financial results and the incumbent media attention they will garner, says Mark Yakabuski, vice president of federal affairs and Ontario region for the Insurance Bureau of Canada (IBC).

Speaking to a monthly meeting of the Property Casualty Underwriters Club (PCUC) in Toronto recently, Yakabuski says the IBC is helping the industry to better answer consumer concerns and government concerns, and to stress all that has been accomplished in the past few years to improve the auto insurance landscape.

In 2003 and the first three quarters of 2004, the industry experienced negative publicity and consumer outrage at profits posted at a time when auto insurance rates were being raised. This was further exacerbated by overall industry results being used by groups such as the Consumers Association of Canada and the NDP party, in their campaign for public auto insurance. And the furor came despite continued losses being sustained in the Ontario auto market, which represents almost one-third of the entire p&c market in Canada. In fact, Ontario auto produced a nearly $560 million loss in 2003.

With the industry set to report record profits for 2004, Yakabuski says the IBC is looking to shorten the industry’s moment in the media spotlight, which could start with individual company results or when industry results are released in mid-March. “It will be a huge challenge for us as an industry to manage that negative publicity.” The IBC is already speaking to government to bring context to the results, and will be giving industry personnel and brokers tools to help answer customer inquiries.

Among the points the IBC wants to hit home are: that the results represent the cumulative profits of more than 200 companies; that those results pale in comparison to profits posted by other corporations including banks and life insurers; that profits will lead to further premium reductions; and that these profits are coming at the tail end of one of the worst downturns in the industry profitability cycle in history. In the end, Yakabuski notes, the industry still only sees about 6-cents of every premium dollar as profit, with the rest going to pay claims, taxes and expenses including salaries.

Yakabuski also stresses that Ontario’s drivers are seeing the fruits of more than two years of auto insurance reform, with premiums having declined 12% on average between November 2003 and September 2004. The rate reductions filed since November, 2003 should realize about $900 million in savings for Ontario’s drivers this year, he notes.

“We had next to disaster happen in Ontario and we turned the corner,” he says. This includes a reduction in medical/rehabilitation claims costs which should be even greater in 2005, and a 65% reduction in the number of drivers in Facility Association, the industry’s pool for high-risk drivers. The resulting cost savings are going back to consumers, he notes, and the IBC is seeing the outcome of these savings in terms of an 88% reduction in the number of consumer calls to the bureau which are about premiums. “No one is going to give us credit for lower rates,” he admits. “The surest sign that people are getting premium relief is that we aren’t getting any calls.”

Most important, he says, will be maintaining the morale of industry personnel when the inevitable media attention comes. “No one ever won a war with demoralized troops,” Yakabuski concludes.