Canada's Competition Act negates dream of a single cost calculator: IBC

Lorne Perry

As a broker who served on the IBC working group and promoted the issue with IBAC I would like to share some of my observations. ITV is not as big an issue in all provinces in Canada as it has been in British Columbia. Consequently the push for change is not as strong countrywide.Our work has raised the level of awareness and contributed to some software vendors developing simpler calculators. We have determined that approx 50% of the time consumers are wrong about the square footage and age of their home. No matter what method you decide to use we will never have anything close to accuracy when these 2 data points are wrong. As a result we have promoted a campaign to assist consumers to get the right information. Competition is a major factor all around. Between insurers, between brokers and between software vendors. To suggest that there be one ultimate best solution is near impossible at this point. I do not believe that the industry could agree on one solution. All software vendors feel that they are accurate even though they are not producing the same figures as their competitor Insurers generally feel that values are too low and brokers feel they are too high. How do we find a solution that all can agree on??? The working group soon realized that we were not going to be able to provide a solution from the existing options and therefore developed a best practices approach to the problem. We have a best practices document that I hope insurers will adopt. It allows freedom of choice but provides reasonable guidelines. Allowing a choice of software vendor but then being consistent and use that same vendor for all calculations. Maintaining training standards and guidelines for the use of upgrading software versions are also outlined.Recommendations on how often re-evaluations should be performed are addressed. Suggested guidelines are also available for brokers and software vendors to consider. These guidelines are not the total answer but adoption by all with an interest will bring some integrity to the problem.It will take all of us to be responsible and to encourage a best practices approach. There has been positive movement and more is being done. The new product Iclarify has been developed in response to the problem and is being tested or soon to be tested in various provinces across the country.Early indications are that it could be a beneficial piece of the solution. I encourage you to become familiar with the suggestions of the working group and to support those that are taking steps to help incorporate them. Although not the silver bullet we all hope for we will all be closer to less frustration!

Posted June 22, 2010 08:11 PM

Bob King

Here we go, still shooting at shadows. I don't believe that the perfect valuation sought after by the calculators is even the target. Stop shooting, you'll never hit it! Five different calculators, five different appraisers, five different brokers will all come up with 5 different answers. We should be shooting for is a simple calculation, a reasonable valuation, within an acceptable tolerance, that helps provide equity of premium paid by different policyholders and that actuaries can rely on to set rates. Our industry is premium adequate overall, whether underinsured ot not, and maybe not policy by policy, but our expense ratio is rising by the day. Get real people, if we are going to retain GRC, let's pick some resaonable square foot guidlines with relevant and simple modiying factors and let us get back to productive work.

Posted June 22, 2010 12:40 PM

Kevin McIntyre

I was the moderator of the Habitational Symposium at the IBABC convention last week. I have grown very tired of the IBC position on the Competition Act. It get's trotted out as the reason not to solve a lot of problems. The IBC staff have their hands tied. Maybe the IBC should be lobbying government to change the rules instead of resigning themselves to some potential fictional fears. We always have to remember IBC is just the trade association for the insurers, not their governing body. They can only do what their masters instruct them to do. If the focus shifted to consumers, that consumers need a solution to this problem, and consumers need some certainty, the results might shift. I think it is time that IBAC considered taking this task on as a new challenge. We have the strongest lobbying group in the country, grassroots support among politicians, and the ability to beat the banks. Stanbd aside IBC, and let the brokers get it done.

Posted June 22, 2010 11:43 AM

D Foley

Then the bottom line is that there should be a governing body or Advisory body that recommends one calculator. Insurers should then say we are using this one calculator for TIV and settle it once and for all. I still don't understand why IBC is waffling on this or how the Competition Act is even involved. They need to take a stand. I'm sure the Insurance Company's Actuarys would appreciate some consistancy.

Posted June 22, 2010 11:36 AM

Linda Hubert

Why would insures advising their brokers that they have to use one cost calculator be contravening the Competition Act? It would make sense that they let the broker decide what one to use, but still tell them they have to choose one. The problem I am having is that all insurers use their own calculators and come up with different costs. They then insist that theirs is the one we have to use. Because of this I get several different quotes because they all have different limits. To combat this we tell the building owner they should have an appraisal company come up with the cost and advise the insurers this is the cost we will be using because it comes from an impartial third party.

Posted June 22, 2010 10:19 AM