Marketplace

REGULATION

Ottawa drafts rules on mutual conversions

Economical Insurance has “welcomed” the federal government’s proposal to broaden the Cabinet’s power to make regulations on the conversion of mutual insurance companies into companies with common shares.

Conservative MP Peter Van Loan tabled Bill C-31 in the House of Commons in March. In addition to implementing part of the 2014-2015 budget, the omnibus bill also proposes several changes to the federal Insurance Act. Section 237 of the existing Insurance Act gives Cabinet the power to make regulations on applications of mutual insurance companies to convert into firms with common shares.

Economical Insurance announced in 2010 its intent to demutualize, “subject to approval” by both policyholders and regulators.

Once enacted, “the next step will be for the Department of Finance to release draft demutualization regulations, which are expected to be subject to a public consultation period before coming into force,” notes a press release from Economical Insurance. “At that point, Economical’s Board of Directors will be in a position to determine whether demutualization within the final regulatory framework would be in the best interests of the company,” the statement adds.

Power to stop unsafe railways from operating

Ottawa is proposing that the federal transport minister have the power to stop a railway from operating if there are “extreme safety issues.”

The Railway Safety Act currently gives railway inspectors the power to issue a “letter of non-compliance” if a railway firm is found to be violating the law. A rail operator has 14 days to correct the problem.

At present, Transport Canada’s only option in cases of persistent non-compliance is prosecution. But the proposed Railway Operating Certificate Regulations and associated legislative provisions expand the federal department’s enforcement continuum, providing the transport minister “with the ability to remove a (railway operating certificate), thereby stopping a company from operating in a case where there are extreme safety issues.”

The minister could also suspend or cancel the railway operating certificate if the prescribed conditions of issuance cease to be met, or if any provision of the act or its instruments is contravened. 

Online arbitration scheduling tool tested

The Financial Services Commission of Ontario is testing its online service to schedule pre-hearings and settlement conferences, in a bid to streamline arbitration for auto insurance claims disputes.

FSCO looks to be moving on with the phased implementation of Arbitration eCalendar, announced in January. Its aim is to make scheduling more accessible and flexible, minimize administrative costs and free up time for commission staff.

The regulator has invited an insurer and a law firm to test the service. Once the testing is complete, FSCO will begin inviting other companies to register for the service.

While participation will be voluntary at first, registration and participation in the service will become mandatory. 

Alberta government earmarks funds for flood mitigation

The Insurance Bureau of Canada (IBC) supports the move in the Alberta government’s budget to earmark $1.5 billion for flood mitigation and recovery programs over the next three years.

The provincial budget calls for $700 million for future flood mitigation projects, including grants for erosion

control, flood hazard mapping, mitigation related to water and wastewater infrastructure, protecting “high-priority” areas and an additional $859 million for flood recovery.

More severe weather “overburdens our sewer and stormwater infrastructure, resulting in more sewer back-ups in homes and businesses. We know there is need for Albertans to prepare for the inevitable,” Bill Adams, vice president of IBC’s Western and Pacific region, says in a statement.

CANADIAN MARKET

Economical Insurance to stop writing insurance in N&L

Limited opportunities for profitable growth, combined with a challenging regulatory environment, were key considerations in Economical Insurance’s decision to stop writing insurance in Newfoundland and Labrador.

The move, which takes effect as of October 1, 2014, follows a thorough review of its business there, Economical Insurance notes.

Existing policies with Economical Mutual Insurance Company or its subsidiary, Federation Insurance Company of Canada, will be honoured in full as per the coverage terms and conditions up to the expiry date.

In line with its stated intent in 2010 to demutualize, the mutual now has a new operating model. “We will enhance broker and customer experience, and will produce tangible cost savings that will support our future profitable growth,” says Karen Gavan, Economical president and CEO.

SGI Canada exits Martimes in favour of western expansion

SGI Canada has entered into an agreement to sell its shares in the Insurance Company of Prince Edward Island (ICPEI) to EGI Financial Holdings Inc. at book value, estimated to be $10 million, with another $3.5 million to license the use of SGI’s computer systems.

The deal is expected to close this summer, notes a statement from SGI Canada.

SGI Canada purchased 75% of ICPEI’s shares in 2001. But the carrier reports it now plans to “redirect resources” and focus on Ontario and Western Canada, and recently applied for a licence to compete in the B.C. p&c market.

“Our plans to exit the Maritimes and move into B.C. will allow us to achieve geographic diversification targets faster, spreading risk more effectively and helping ensure financial stability for the company and, ultimately, providing enhanced security for customers in all regions,” says Andrew Cartmell, SGI’s president and CEO. 

RISK

B.C. launches public consultation on quake preparedness

British Columbia plans to invite input from stakeholders on how the province can better prepare for and respond to a catastrophic seismic event.

“This emergency management consultation regarding catastrophic seismic events will directly involve all levels of government,” the provincial government reports.

“The property & casualty insurance industry agrees that it’s time for regional and national conversations on how to prepare for a mega-earthquake, which could happen at any time,” says Bill Adams, vice president for the Western and Pacific region of the Insurance Bureau of Canada.

Stakeholder roundtable activities will focus on those regions at highest risk, with the final report expected to be submitted by year’s end.

CLAIMS 

Aviva water damage claims flow in 2013

Last year saw Aviva Canada paying out a record of more than $190 million in water damage claims, a 69% increase over 2012.

“With last year’s storms, water damage reached an all-time high, making up 51% of all Aviva Canada property claims,” notes Wayne Ross, vice president of property claims for the insurer.

If the 2013 Alberta and Toronto catastrophes were removed from the calculation, Aviva Canada reports, water damage would still have made up 40% of all property claims for the insurer.

Data also shows that last year, the average cost of a water damage claim rose to $20,537, a 130% increase over the $8,944 the company experienced 10 years earlier.

“The reasons for the upward trend are rather simple,” Ross says. “The increasing investment Canadians are putting into their basements, combined with more frequent severe weather events and an aging sewer system that is unable to deal with large amounts of water within a short time period, results in a lot of homes experiencing damage,” he adds. 

TECHNOLOGY

Consumers want policy info via mobile devices

More than half of consumers included in a new survey say they want certain insurance policy information available through either e-mail or smartphones, but most insurance providers are behind on delivering useful information through mobile technology.

In the global survey from predictive analytics firm FICO, 55% of consumers said they want policy renewal reminders delivered via e-mail or smartphone, and 52% said they are interested in alerts regarding changes in their policy.

The survey included 2,239 adult smartphone users in the United Kingdom, Australia, Brazil, China, France, Germany, India, Italy, Japan, Korea, Mexico, Russia, Turkey and the United States.

Mobile communication is still under-used by insurers. Two-thirds of respondents reported never using their smartphones to manage or interact with their insurers. 

Use of predictive models growing: Towers Watson

Property and casualty insurers in the United States have increased their use of predictive modelling across almost every line of business over the past year, indicate results of a new survey by Towers Watson.

Despite that, most businesses taking part in the company’s fifth annual survey still lack a comprehensive, company-wide approach for using predictive modelling for all “core functions,” Towers Watson notes. The survey involved 59 U.S. p&c insurance executives.

Overall, insurers are often not applying their data-driven analytics uniformly throughout the business, while overall usage fluctuates significantly by line of business and company size.

A compelling case can be made that well-executed predictive modelling provides better pricing guidance to underwriters, Towers Watson reports in a statement.

Among those using predictive modelling, most said it has led to favourable bottom line results with positive impacts on rate accuracy (85% personal, 96% commercial), profitability (80% personal, 78% commercial) and loss ratio improvement (80% personal, 74% commercial). 

REINSURANCE

Reinsurance market in state of flux: Willis Re

Traditional reinsurers must be mindful of areas into which they are looking to diversify in the face of increased competition from the influx of capital markets capacity, notes Willis Re president Paddy Jago.

Jago says the reinsurance market is in the greatest state of flux he has seen during his 35 years in reinsurance.

Remaining relevant, he emphasizes, demands three things: having a high degree of expertise; being of a certain size; and having in place relationships in the reinsurance market.