Marketplace

REGULATION

Ontario Liberals support NDP motion for gradual reduction in auto rate

 The Liberal minority government has backed a New Democratic Party motion to reduce auto insurance rates by 15%, Premier Kathleen Wynne said in March, while reiterating her party remains focused on anti-fraud reforms.

The motion by Jagmeet Singh, NDP consumer affairs critic, called for the provincial government to direct the Financial Services Commission of Ontario (FSCO) “to gradually reduce average, industry-wide, private passenger auto insurance premiums by 15%.”

Support is non-binding on the government and there has been no offer to specify the 15% reduction figure in the budget. NDP leader Andrea Horwath included the percentage in her list of priorities for the 2013w budget, initially calling for the cuts to be completed by next March.

The Liberal government reiterated the best way to reduce consumer costs is by implementing the recommendations of the Auto Insurance Anti-Fraud Task Force.

The Insurance Bureau of Canada (IBC) reports being pleased the government acknowledges that “reducing costs is the key to reducing premiums.” Any reductions to auto insurance rates must be tied to larger reforms, IBC spokesperson Steve Kee says.

Earlier in March, the NDP had demanded the Liberal government provide more details on what FSCO is doing to address the issue of insurance industry profits and driver premiums.

Last October, says Sonia Taurasi, FSCO’s acting senior manager of public affairs, the regulator retained two finance experts to conduct a review of the profit provision benchmark in auto insurance rate change approvals. Stakeholder submissions were received in December and in-person meetings held in January, Taurasi says. The final report is”expected in spring 2013.”

IBC has commissioned an actuarial study to look at the profit margin for Ontario auto insurance in recent years, with results expected in April.

Randy Carroll, CEO of the Insurance Brokers Association of Ontario, says the gradual reduction in auto insurance rates recently advanced by the Liberals makes the 15% target more realistic. Whatever the time frame, Carroll emphasizes, reductions mandated must be “responsible.”

CANADIAN MARKET

Personal lines results central to 2012 growth for Canadian P&C market 

The Canadian property and casualty insurance market saw substantial growth in premiums in 2012, largely as a result of growth in personal lines, including improvement in Ontario auto results, notes preliminary data from MSA Research.

The figures show that the industry’s combined ratio for the year was 96.7% compared to 99.5% in 2011 (not including those in the Lloyd’s market and government insurers).

Better accident benefits results in Ontario and lower property losses allowed for the growth in personal lines, MSA Research CEO Joel Baker notes. But improvement in the Ontario auto market was offset by deterioration in third party liability-bodily injury losses, Baker adds.

On the commercial side, excluding the Lloyd’s market, commercial writers saw premium shrink by 4.4% in 2012, he reports.

Reinsurers saw results improve, reporting a combined ratio of 97% in 2011 to 89% in 2012, Baker says. This was due, in part, to a less severe catastrophe year in Canada and somewhat harder rates on cat-exposed risks.

More consolidation expected for P&C sector 

Some property and casualty carriers are deploying multi-prong distribution strategies, which is putting pressure on the marketplace and resulting in activity on the mergers and acquisitions (M&A) front, Allan Buitendag, a partner and Canadian insurance consulting leader at PwC Consulting, said during his presentation at the Ontario Mutual Insurance Association’s 2013 annual convention in March.

“There are challenges around people trying to control their distribution,” Buitendag said. “Our perspective is what you’re going to see in the next two years is going to be increasingly more aggregation around the market share side. Many of the companies that are going through significant transformation activities right now, including both operations and IT, are striving to become more efficient, to drive down that combined ratio, and position themselves well.”

A lot of the recent activity has been on the broker side, Buitendag noted, although certainly there have been some large deals on the carrier side in recent years. The cost of “organizations seems to be quite high, but I think we’ll see some ongoing activity in the industry and more consolidation.” 

CLAIMS

FSCO near midway point of mediation backlog pilot 

The Financial Services Commission of Ontario is reaching the midway point of a six-month pilot aimed at streamlining part of the mediation process and saving mediators’ time.

Effective January 2, the pilot program has allowed parties involved in mediation who have already been assigned mediation dates, or who have files more than 50 days old, to go through one e-mail address to request rescheduling or adjournment.

Before the pilot, FSCO was receiving upwards of 100 requests weekly to adjourn or reschedule, which was taking up a significant amount of mediators’ time.

“These requests only require that parties provide a new date that is agreed upon together, without input from FSCO,” the regulator reports. Those eligible in the pilot must now e-mail the mediation address with a written rationale for requesting rescheduling or adjournment. One mediator handles the account. The decision is final.

Fewer requests are being received, and FSCO will assess how the pilot is working at its midway point. The mediation backlog in 2012 was 17,540, with an average wait for mediation of 414 days.

Appeal court upholds ruling in optional auto benefits case

The Court of Appeal for Ontario has upheld a lower court’s finding that Meloche Monnex Insurance Company breached its duty of care to a claimant of optional auto insurance benefits, but that the claimant would not have purchased those benefits anyway.

In Zefferino v. Meloche Monnex Insurance Company, Nicola Zefferino alleged Meloche was negligent since it failed to properly offer optional income replacement benefit coverage as part of his policy. In January 2012, Ontario’s Superior Court of Justice dismissed the claim in summary judgment on the basis that Zefferino had turned down optional benefits in two separate telephone calls with the insurer.

“In my view, the plaintiff (or his spouse) chose to purchase the least expensive form of insurance available,” the judge wrote. “He cannot now change that bargain.”

In dismissing the appeal, the appeal court found that the trial judge had not made an overriding error.

Insurers must tap into technology to improve customer service

Improving the customer experience, especially through leveraging data analytics, is among the key issues facing the property and casualty industry in the coming year, notes a new report from PwC.

With mobile technology and e-commerce, customers now expect fast, convenient service, states Top Insurance Industry Issues in 2013.

“Revisiting customer experience programs, changing traditional distribution platforms, designing products that balance consumer and producer needs and differentiating value proposition through new models of advice will help open the door to new opportunity, business and profit,” suggests Jamie Yoder, PwC’s U.S. insurance advisory practice co-leader.

Embracing things like smartphone applications can improve operational efficiencies, enhance customer services such as billing and claims-handling, and foster better customer relationships.

RISK MANAGEMENT

Human link identified as the weakest link

Concerns over brand reputations are on the minds of security leaders, says a report from Telus and the Rotman School of Management at the University of Toronto.The Canadian IT Security study took a qualitative approach to its research, sitting down with IT and security decision-makers from firms across the country and asking them what keeps them up at night. Responses included a fear that their organizations have been breached, but they do not know about it. People are also often seen as the weakest link in IT security, with many data breaches coming from “insiders,” usually unintentionally.

The report cautions that strict policies on social networking and mobile devices may lead staff to break rules and leave their technology open to unmonitored threats.

Organizations must ensure employees understand how to use tools responsibly, and make adherence to security policy convenient and simple.

REINSURANCE

Swiss Re reports 2012 insured losses reached $77 billion

Insured losses from natural catastrophes and man-made disasters in 2012 total $77 billion, making 2012 the third costliest year on record, Swiss Re notes in its latest sigma report, released in late March.

Still, those figures are significantly less than the insured losses of more than $126 billion in 2011, a record year for earthquakes and flooding, Swiss Re adds.

Weather-related events in the United States throughout 2012 heavily contributed to last year’s losses, notes the report. Nine of the 10 most expensive insured loss events in 2012 were in the U.S., it states, with approximately $65 billion in economic losses covered by insurance.

Unsurprisingly, Hurricane Sandy was the most expensive event of the year, both for economic and insured losses. Insured losses were roughly $35 billion, with between $20 billion and $25 billion covered by the private insurance market, Swiss Re reports.

Most of the damage was caused by severe winds and massive storm surge, the report adds. A simulation exercise contained within the study explains that increased sea levels of 10 inches by 2050 will almost double the probability of flood losses occurring. That translates to an approximately $20-billion insured loss event, which Swiss Re expects to occur once every 140 years (the current expectation is once every 250 years).