IBC president breaks down provinces facing auto insurance uncertainty
Published: February 28, 2019
CATEGORY: Car Insurance
Earlier this month, the president and CEO of the Insurance Bureau of Canada (IBC) offered his assessment on the auto insurance situation in Canada.
At one of the bureau’s luncheon events, president and CEO Don Forgeron opened the event with some home truths about Canada’s insurance industry.
“Comparing the first nine months of 2018 results to the same period in 2017, we saw deteriorating conditions in the P&C market,” Forgeron said. “Combined loss ratio increased – from just over 99% in 2017 to 102%.”
Furthermore, ROI is lower, and ROE has also plummeted. Forgeron explained catastrophe events were a main cause of the underwriting loss. In fact, Canada’s insurance market is facing $2 billion in cat losses through 2018.
The executive says the Insurance Bureau of Canada wants to see a whole-of-society model when dealing with cat events. Forgeron adds natural disasters are not a government-only problem. Additionally, the auto insurance market is damaging the industry and major reforms are needed.
Perhaps the most insightful part of Forgeron’s speech was a break down of the insurance market across each province in Canada.
British Columbia: IBC has been a long-time advocate of introducing competition into B.C. to help ease financial pressure on the Insurance Corporation of British Columbia. The public insurers holds a monopoly on mandatory basic car insurance, but IBC wants private companies to join the fold.
“We’ve done public opinion research that shows overwhelming support among British Columbians for ending the provincial monopoly and allowing new entrants into the marketplace,” Forgeron said.
Alberta: Forgeron says Alberta’s auto insurance system is possibly more complicated than British Columbia’s.
“In the first nine months of the year, 99% of private passenger vehicle insurers in Alberta had a combined loss ratio of 100% or more. Some are operating with ratios as high as 129%,” IBC’s CEO added.
He describes Alberta as “headed for a cliff” if changes are not made. Like Ontario and B.C., government, consumers, and insurers will be affected if the situation remains the same.
Ontario: Ontario’s auto insurance problems are well documented. Consumers are paying more for coverage than other Canadians due to rife insurance fraud and a broken system. Insurers are not making money and reforms have largely failed. Forgeron says the IBC continues to meet with the new provincial government to develop functional changes. He said the confirmation of an auto insurance review is an important first step.
Newfoundland and Labrador: NL is another province facing uncertainty in auto insurance. The Public Utilities Board has recently published its review into the system. Insurers insist profits are declining enough that some may leave the market, while consumers are paying more for coverage to offset increased claims costs.
New Brunswick: Forgeron says the IBC is still feeling out the new government as claims pressures continue in New Brunswick. He wants the bureau to continue to work with the government to find solutions to a growing problem.
Forgeron closed his speech by saying regulations for insurance have been ineffective over the last 20 years and have failed to capture new technologies.
“And regulation should be flexible enough to allow it,” he said. “Maybe even to encourage it. Because innovation is an essential part of a truly competitive environment – and a prosperous society.”
“Stale regulation supports the status quo. It acts as a disincentive to progress and better ways of doing business and serving customers,” he said.
“As an industry, we need to put ourselves in our clients’ corner –and emphasize that we are acting on their behalf, in their interests. Because, to be candid, we have a long way to go in Canada.”