Looking Back… or to the Future?

However, in Anderson’s words, “I’m not retiring, I’m re-treading”. Despite the many gains and tumultuous occurrences the insurance p&c sector underwent during the past decade, Anderson believes that the cyclical nature of the industry has held true: “I’ve been through a decade of the same issues recurring.” In this respect, his vision for the future prosperity of the industry is positively stalwart. From a personal perspective, he adds, “I’ve been president of the IBC for 10 years, which is long enough to reap the rewards, or otherwise, of the decisions I’ve made”.

“What goes around, comes around,” comments George Anderson, retiring president and CEO of the Insurance Bureau of Canada (IBC). This sage observation comes after 10 years of experience at manning the “policy direction” and “political lobbying” functions of the Canadian property and casualty insurance industry’s mainstay public representative body. Notably, he points out, “what we went through in the early 1990s, such as Ontario product reform, it looks like we’ll [the industry] be back at again”.

In the same sense, Anderson does not believe that the p&c insurance industry has “snapped the elastic band” with regard to its traditional business cycle. Although, he does admit, “I was surprised by the length of the most recent soft market. But I’m sure that profitability will return to the industry. You can’t ignore the cycle, that’s like trying to ignore the contractions and expansions of the economy. Things go up, and they go down, the cycle’s there, it just changes shape.”

From an IBC perspective, Anderson sees the biggest challenge facing the newcomer to his role as being “maintaining focus on what members want. When you run a trade organization, you tend to focus on one or two big things. A lot of associations lose sight of what the members want.” Prior to taking on the position of president of the IBC, Anderson notes that the presidential role primarily involved dealing with “Ontario matters”, with little attention afforded to the broader national issues facing the insurance industry. “Before I took the job, the president handled the Ontario region [predominantly], and ended up spending all the time dealing with Ontario auto and did not have much time developing policy around national issues.”

During Anderson’s period of office, the IBC expanded its infrastructure to appoint a regional director for Ontario, as well as step up its awareness building campaign on national industry issues — from B.C. earthquake risk to natural disaster mitigation development, and road safety programs such as the graduation driver licensing system which has subsequently been adopted by seven of the ten provinces. The bureau has also been successful in expanding its membership numbers, and on the lobbying front, opened an Ottawa office. “Basically, we designed a system that really allowed our members to influence the agenda.”

Big “wins”

During Anderson’s period in office, the IBC scored at least five “big wins”, with the swing in political attitude toward the “bankassurance” controversy being perhaps the most notable. Although far from a “done deal”, the battle to keep the banks out of the branch retailing of insurance, and ensuring that the p&c insurance sector remains regulated separately to the “wealth management” side of financial services, turned into a major victory for the IBC when the federal government approved its long-awaited new financial services bill. “The bank/insurance debate has been a significant issue during my term. However, the most important aspect of this outcome is that we managed to get the government to accept the philosophy that p&c insurance is different to other financial services — it’s [p&c insurance] is about risk management. Sure, this was a political win, but it was also a ‘policy’ win.”

The IBC’s work in investigating and creating awareness around the public issues of road safety and fraud have also produced meaningful dividends, says Anderson. Although initially regarded with a skeptical eye by politicians, the IBC’s graduated driver licensing program has now been adopted in one form or another by seven of the ten provinces. Surveys carried out by the IBC, as well as by the provincial governments, all point to dramatic savings in both lives and property through reduced auto accidents, Anderson notes. And, on the insurance fraud side, the IBC’s public awareness campaigns highlighting the add-on costs to premium rates as a result of fraudulent claims also appears to be winning favor. “Once again, our surveys would seem to show dividends in terms of public awareness,” he adds. Furthermore, the IBC has played a pivotal role in facilitating the industry’s ability to detect fraud.

Another victory for the IBC lay in setting the groundwork for natural disaster mitigation. “This was a really big achievement in gaining political awareness of the effects and risks associated with natural disasters,” Anderson comments. The critical importance of doing so led the IBC to create a new office, the Institute for Catastrophic Loss Reduction (ICLR), to spearhead the political campaign, as well as coordinate research into exposures and measures which can be taken to mitigate recurrence of losses.

While the typical association of a “natural disaster” would be something like a hurricane as in the “Perfect Storm”, or the ice storm which brutally struck Quebec and parts of Ontario in January 1999, the real natural disasters are often the much less dramatic but repetitive events such as flooding and hail storms, Anderson says. With proper planning, the losses associated with such events can be greatly reduced, as well as lives saved. Possibly the three biggest projects the IBC has undertaken in this regard is the hail suppression project in Alberta, research into flooding in the Manitoba, Red River Basin area, and earthquake risk in British Columbia. Although far from a “concluded deal”, the work into natural disaster prevention has resulted in at least one Senate committee investigation being appointed by the federal government to look into mitigation initiatives, as well as the creation of a new federal office to specifically handle disaster preparedness. Several joint research projects involving the provincial governments, the insurance industry and scientific community have also been initiated over recent years, Anderson observes.

Works “in progress”

One of the biggest and long-term cost debates to have emerged from the 1990s is medical treatment expenses, Anderson notes. With medical treatment inflation applying to auto accident claims running at about 14% a year — with “soft tissue” bodily injury (BI) expenses being the main culprit — auto insurers have been fighting a losing battle to achieve profitability in nearly all provinces.

Specifically, the spotlight has been on Ontario, where the IBC engaged the government for product reform a number of years ago. This resulted in the passing of Bill-59, which initially provided some cost relief to insurers. However, Anderson observes, many of the expected amendments to contain medical treatment expenses were never carried through by the legislators. Now, with the auto loss ratio running at historical highs, the issue has come full circle, with insurers once again pushing for product reform. “This is something that will carry on, but we’ve achieved a lot in taking on the medical industry,” Anderson says. Specifically, the IBC was recently successful in implementing a standard healthcare invoicing system.

Another ongoing issue is the “cost of regulation”, comments Anderson. Ultimately, this comes down to “what is the cost benefit?” The IBC has over the years met regularly with the federal and provincial regulators to identify more efficient and meaningful approaches to regulation. While this has sometimes proved to be an uphill battle, Anderson believes there is some light showing at the end of the tunnel.

“We’ve got a very persuasive case now,” he adds in response to the cost-impact and marketplace volatility caused by the current rate filing system and potential political inte rference allowed by such a system. “The governments will not back away from some control on the pricing of a mandatory product [such as basic auto insurance], but it’s all about how they go about doing it. I do think the regulators are moving toward a ‘file and use’ approach, as they’re beginning to realize that the most efficient means of regulation is the competitiveness of the marketplace.”

Looking ahead

Has the Canadian p&c landscape been fundamentally changed by major events such as the January 1998 ice storm, or by the more shocking events of the September 11 terrorist attacks? Anderson does not believe so.

“I don’t think that September 11 will ultimately have a significant impact on the business,” he muses, “but events such as this will cause insurers to rethink their risk exposures”. Major events have occurred in the past, he adds, and the industry has adapted to accommodate such risks. In this respect, he believes that the insurance industry will react to terrorism risks in a logical manner. “Companies are already talking about new programs to accommodate such risks.”

But, this does not mean that the Canadian insurance marketplace will remain in a fixed position. The rules of competition will ultimately dictate the form and direction of the industry, Anderson points out. In this respect, he expects to see further consolidation within company ranks, with some foreign players withdrawing from the market. The future will also likely see insurers moving into niche areas of business, essentially becoming “specialist carriers” in order to remain competitive forces.

Another area that is already showing signs of change is distribution, he says. “It is very interesting to note over the past 10 years the growth in company branding.” This, however, does not mean that any single distribution channel is likely to emerge as a domineering force, he maintains, but simply that, once again, the industry is reacting in a competitive manner to changing consumer needs. “I think we’re going to see continued expansion in distribution modes, a proliferation of distribution channels.”

“Re-treading”

Following retirement from the IBC, Anderson says he will be splitting his time between part-time teaching at St. Francis Xavier University in Nova Scotia, and at Carleton University in Ottawa. He also plans on catching up with lifelong travel adventures with his wife, Lezlie.

Between holding joint residencies in Nova Scotia and Toronto, Anderson hopes to find time for his four leisurely passions — painting, reading, golf and fly-fishing. “I don’t know if I’m any good at it [painting], but it works for me, and I have hundreds of books in my library, many of which are unread.” Anderson hold a has two daughters, Jennifer and Lisa.

Anderson holds a Doctor of Laws degree and a Bachelor of Arts degree (with distinction) from Carleton University. He also attained a Master of Arts from the University of Regina. Prior to joining the IBC, Anderson served as the CEO of the Canada Mortgage and Housing Corp. “Working in housing and insurance, there’s a lot of good that comes from these two things. I leave with a lot of gratitude for all the experiences I’ve had, not a lot of people can say that,” he surmises.