May 4, 2015 by Jeff Pearce
I’m not a number cruncher, but sweet Beelzebub on a Harley, I wish some people would do some deeper thinking (my boss won’t let me write expletives in my copy, so scribble “#@&!!” above my bald dome in the photo and use your imagination). When the infamous York U study on auto insurance profits was released, one reporter asked Ralph Palumbo of the IBC: “So why should insurance companies be allowed to make 11 percent, mandated?”
Allowed? Now if I was back in the mainstream media, I might ask instead, with cheerful insolence in a PeeWee Herman voice, “Hi, guys! Are you gouging consumers? Fudging the numbers?” But I wouldn’t bury the assumption within my query that the ghost of Hugo Chavez had his paws on the levers of finance in Ontario. Insurers are entitled to make a profit. The issue is transparency, and that’s something about which questions should and need to be asked.
Premiums and rates are only parts of the equation, and if you’re going to determine whether the industry is capital-constrained, you have to drill down to the operational costs of individual insurers rather than expending energy on just big picture ROE figures and the regulatory cap. It means checking fraud stats. It also means looking at the impact of personal injury awards. Oh, whoops, the York U study was paid for by lawyers.
So, by the way, here’s another fun statistic. According to a survey done for Robert Half Legal, “Litigation is expected to yield the most job opportunities from January through June of 2015, according to 35 per cent of attorneys surveyed. Within the litigation practice area, commercial litigation was cited by 43 percent of lawyers as the leading driver of job growth, followed by insurance defense (25 percent).”
Shall we examine the capital constraints there?
Both Palumbo and the IBC’s media director Steve Kee say the media should do a better job of reporting hard financial data. “I think the media is lazy, frankly,” says Kee, “because this is really complex.” And he’s right. It is complex. It needs better, closer attention.
And let’s discuss the IBC’s suggested reforms (see “Now Hearing the Case of Insurers vs Lawyers”). Let’s shine a light on how much personal injury lawyers make in contingency fees, as Randy Carroll, former CEO of the IBAO, suggests. Let’s examine why certain criminally reckless drivers are still on the road. Yes, the system’s busted. Consumers are in a deep hole, so let’s use some four-wheel drive thinking for a change.
This story was originally published by Canadian Insurance Top Broker.