Marketplace

REGULATION

NDP presses Ontario to lower auto rates

The Ontario New Democrats continue to press the ruling Liberals to commit to cutting auto insurance premiums.

In December, NDP leader Andrea Horwath said in the provincial legislature that she wants the Liberal budget for 2013-2014 to include measures to reduce premiums. In February, Horwath proposed that the Financial Services Commission of Ontario be mandated to cut auto insurance rates by 15% by March 2014.

“The rubber hits the road in a budget, and in that budget I want to see affordability measures, particularly on auto insurance,” Howath has said.

Liberal MPPs have reiterated the need to focus on moving ahead with recommendations of the Auto Insurance Anti-Fraud Task Force and adopting the regulatory changes that were tabled in January.

In late February, officials for the Insurance Bureau of Canada met with Horwath to discuss auto insurance rates.

Need to revise backwater valve language: ICLR

Urban flooding in Canada: Lot-side risk reduction through voluntary retrofit programs, code interpretation and by-laws, a research paper released in February by the Institute for Catastrophic Loss Reduction, calls for revising provisions in building and plumbing codes related to installing backwater valves.

The paper recommends rewording or clarifying sentences in the National Plumbing Code and other provincial building and/or plumbing codes to ensure they are clearly and consistently interpreted and applied. An alternative would be to “provide guidance to local authorities about how code wordings related to protection of homes from sewer backflow should be interpreted. This guidance should outline that code wordings be interpreted in a way that requires the mandatory installation of backwater valves in all or most new Canadian homes.”

Requiring valves is justified because of the “substantial costs associated with sewer back-up insurance claims, the legal liability of municipalities generated by regional sewer back-up events, health and home liveability risks posed to households created by sewage flooding and the fact that urban flooding and sewer back-up occurrences are likely to increase as a result of increasing frequency of extreme rainfall caused by climate change.” 

CLAIMS

Medical assessment firm sued over auto claims

State Farm Mutual Automobile Insurance Company is suing a Toronto-based assessment centre and four people for more than $11 million.

In a statement of claim filed with the Ontario Superior Court of Justice, State Farm argues treatment plans for motor vehicle accident claimants were filled out by Assessment Direct, and/or individuals also named in the lawsuit, “in the name of health professionals who either never worked at Assessment Direct, were not employed by Assessment Direct at the time the treatment plan was assigned, did not have the qualifications represented on the treatment plan, and/or who never recommended the services and/or assistive devices allegedly that recommended therein.” The allegations have not been proven in court.

Among other things, State Farm is seeking $3 million in damages for fraud, fraudulent misrepresentation and/or unjust enrichment, $3 million in damages for conspiracy and $5 million in aggravated and/or punitive damages.

CANADIAN MARKET

M&A activity reaches records high in 2012

Merger and acquisition activity among insurance agencies reached a record high in 2012, bouncing back after a few years of low activity, notes a new report outlining reported transactions in the United States and Canada.

There were 291 reported transactions in the U.S. and Canada in 2012, notes the annual survey from OPTIS, an investment banking and financial consulting firm.

Privately owned agencies were the biggest buyers, making 93 acquisitions; banks were also active, buying 24 agencies in 2012.

M&A activity is expected to remain strong throughout 2013 since many principals of companies in the agent-broker space are part of the aging “boomer” population.

‘Rapid expansion’ of telematics predicted among insurers

Research firm Strategy Meets Action (SMA) in the United States is predicting that 2013 will likely see “rapid expansion” of telematics and usage-based auto insurance (UBI) programs among North American insurers.

SMA indicates 70% of auto insurers are in some stage of executing, developing or planning UBI programs. There are 18 insurers with UBI programs active in at least one state or province.

Most insurers who are using telematics for UBI are using the method to provide discounts, but almost 30% also have value-added services, notes the report. Among the companies using UBI programs to calculate discounts, mileage is the most frequently used data element, followed by time of day, braking and speed.

Respondents cited benefits like customer retention, more accurate rating, reduction in costs and claims control.

RISK MANAGEMENT 

OSFI releases final revised earthquake exposure guideline

The Office of the Superintendent of Financial Institutions (OSFI) released the final revised version of its Earthquake Exposure Sound Practices (Guideline B-9) in late February.

A working group was created in 2010 to update the 1998 earthquake guideline to do the following: emphasize and strengthen the principles-based approach to managing earthquake exposure; remove references to outdated Default Loss Estimates; update the description of best practices in earthquake exposure management; increase OSFI’s flexibility in the collection of relevant data; and remove the details of the capital formula from Guideline B-9.

Insurers have been asked to assess their practices compared with the new guideline by September 30. The revised guideline is to take effect January 1, 2014.

Most executives expect to benefit from ORSA

More than four in five surveyed executives for North American insurance firms say they will benefit from an own risk and solvency assessment (ORSA), but Towers Watson reports they have a way to go before completing the assessments.

The Towers Watson seventh biennial global enterprise risk management (ERM) survey, which involved 539 senior insurance executives, shows that 68% of North American respondents indicated their company will be required by regulators, or intend themselves, to perform an ORSA. That said, only 20% of respondents noted they “have outlined a road map for their project plan,” just 7% said they had educated the directors on their boards on their new oversight responsibilities, and 12% had produced an initial “dry run.”