The Rigors of Reporting

Regulation is on the radar screen for Canada’s property and casualty insurers. The industry has set its sights on reducing inefficiency and removing overlap from a regulatory system that many see as overly complex, layered and costly.

It has become almost a truism that Canada is one of the most complicated insurance markets in the world. Not only are there varying auto insurance systems from province to province, but different levels of jurisdiction between provincial and federal regulators. This has resulted in duplication, increasingly stringent filing requirements and even encroachment on business practices.

“Regulatory drag” is now a policy platform for the Insurance Bureau of Canada (IBC) as it finds ways to keep the system fair and effective. The industry trade group is seeking to improve efficiency and reduce costs by promoting harmonization among Canadian jurisdictions, streamlining regulatory procedures and eliminating unnecessary practices

Vehicle drive

Regulation is an equally important issue in the provinces. No provincially licensed insurer is immune from reporting requirements and government scrutiny. Whether the issue is pressing auto insurance reforms in Atlantic Canada, proposed financial services legislation in Saskatchewan, or imminently new legislation in Alberta and Manitoba – regulation is never far from the door.

This is especially true in Ontario and Quebec. In addition to other regulatory challenges, insurers in Ontario are working with the government to address persistent problems, such as uninsured vehicles. A joint program of the Ministry of Transportation (MTO) and insurers aims to get these drivers off the roads. A minority of drivers purchase insurance for vehicle registration or license plate renewals and cancel the coverage several days later, keeping the pink slip. Estimates of uninsured vehicles in the province range from 5% to 7%.

To tackle the problem, government and insurers are setting up an electronic method to identify existing coverage on cars. Vehicle Identification Numbers (VINs) and the coverage status of all Ontario insured vehicles now will be recorded at an IBC database through “critical coverage reporting” by insurers and brokers. Test reporting has been conducted over the last several months.

As of March 1, nine insurance companies and 67 broker offices submitted over 5,000 reporting transactions via the Web and various broker management systems. The province-wide rollout of the reporting process starts in April. In fall 2002, the MTO will begin checking on-line against this database to confirm insurance status using customer VINs.

With the uninsured vehicles project, getting the information right and delivering it quickly will be paramount concerns for insurers. Now that the government will be checking the IBC database to determine coverage, inaccurate or untimely data could lead to legitimate customers being denied license plate renewals.

Electronic efficiency

Notably, CGU Canada has gone “electronic” in its processing of vehicle information reporting. The company had previously relied on manual reporting practices and a series of routine processes to file data to the IBC database (most insurers are familiar with the so-called “green sheets”). The problem with this manual data filing approach is that data formats are often “hard coded”, meaning any change in reporting definitions requires rewrites that can take months, if not years. Manual reporting processes also increase both costs and the risk of inaccurate data. Deficiency fees are often levied against insurers for failure to submit correct information on time.

CGU recently switched to fully automated regulatory data submissions. The system is based on Internet-type technology through which data submissions are converted to an XML format. The browser-based application detects errors and permits manual correction prior to submission.

There are two primary advantages to reducing errors, aside from the obvious benefit of better record keeping and filing. Higher quality information can be used for business intelligence and analysis. Error-free data also means more accurate underwriting and potentially higher profits for insurers. CGU says its system has decreased error rates by up to 74% and enabled the company to modify data submissions according to regulatory requirements.

Quebec reporting

In Quebec, the Groupement des Assureurs Automobiles (GAA) recently brought in new statistical reporting plans. The GAA, which collects all data related to physical damage and vehicles in the Quebec auto insurance market, maintains a database known as FCSA, which contains all auto insurance claims made over the past six years. It also administers a statistical plan for insurers, known as “ASP”.

In January, the GAA introduced new versions of both plans, requiring insurers to submit error-free data. There are currently 15 summarized schedules, all of which are interrelated and must reconcile to one another – creating another “data headache” for provincial insurers. The GAA also plans on expanding the statistical database in the future. The bottom-line is that insurers will have to change their reporting processes.

Most insurers recognize that regulation is an important part of safeguarding consumer interests. Accurate reporting also creates opportunities for the quick collection of information and real-time verification of important data. But that does not mean it has to be cumbersome or costly. With hundreds of pieces of information sent to regulators daily and the ever-present threat of changes in reporting definitions, insurers often feel a few screens behind. New technology can give insurers the ability to submit accurate, timely data and put reporting in the hands of business users, not IT departments.

Today’s technology affords insurers a chance to build better regulatory reporting structures, reduce error rates and maintain applications quickly and easily. It can also save insurers money. Technology is not necessarily the answer to all industry regulatory struggles, but it may help clarify at least a few blips on the radar screen.