February 2, 2019 by David Gambrill, Editor-in-Chief
Don Forgeron, president and CEO of Insurance Bureau of Canada, talks to Canadian Underwriter about what’s top of mind for Canada’s home, auto and business insurers in 2019. Here’s his update on where the nation’s insurers stand on auto reform, insurance fraud, and regulation.
cu | So let’s start with arguably the biggest issue facing insurers today — auto reform. As it stands, what is the current shape of the nation’s auto insurance product?
Every auto insurance system in the country, private and public, is showing signs of strain. Some are terribly broken — the Ontario system would be one. The B.C. system would be the main other one. Historically, we have had Ontario on our list for 25 years. Last year, we added Alberta. This year, we are adding all provinces. Auto insurance, writ large, is an issue for the industry.
cu | You have talked about taking a new advocacy approach to promote auto reform across the country. What is the new approach, and why is it needed?
Long ago, a provincial premier said to me as a young vice president of IBC, ‘There is no worse political issue than auto insurance. You get no credit politically if you fix the auto insurance system, and you get nothing but blame if you don’t fix the auto insurance system.’ It’s one of the least attractive public policy issues for a government. The traditional paradigm has been for insurers to be on one side of the issue, trial lawyers on the other side, consumers off somewhere, not being spoken about, and policymakers in the middle trying to pick what they perceive to be the lesser of two evils. We are trying to build a different storyline. Historically, when we have advocated for auto reform, we have asked the government for particular changes to the auto insurance system. And when the elected officials looked behind us to see who was with us, they often didn’t see consumers. I think that’s been a glaring omission in our industry’s strategies historically. If we can build a world where we are seen to be advocating for a better system for consumers, it will be easier for a policymaker to say, ‘Yes, that’s something we can get behind, too.’
cu | So what do consumers want from auto insurance?
What consumers want from auto insurance is balance. They want governments to achieve a balance between the premiums that they pay and the benefits they receive. And in every auto insurance system in the country right now, that balance is gone. We have exceptionally high benefits and, not surprisingly, exceptionally high premiums.
cu | How can the industry help to restore this balance?
I think the key is to focus on evidence-based outcomes for how you treat injuries. I think what most people want is to return as closely as possible to the state of health they were in before the accident occurred. There is a wealth of medical literature on how you treat injuries, but in most cases, governments don’t follow evidence-based treatments. One of the advancements we have made over the past several years in treating auto insurance victims has been to put in place diagnostic and treatment protocols – for example, in Alberta and Nova Scotia. Under these protocols, a certain injury gives rise to a certain treatment. And if that treatment doesn’t work, there is an opportunity for more or different treatment. In the vast majority of cases, the initial treatment works and the medical literature says it works, based on studies and tracking those results. If you focus on that, getting people the care that they need, we believe, fundamentally, that insurance premiums will track with that. I think we can find that balance that consumers want.
cu | Fraud is top of mind for many insurers. What opportunities exist for the industry to work more collaboratively on this issue?
The sharing of information is key to one of the successful components of a national fraud strategy. Within IBC, we have had an industry group in place working on this issue for the past two years. It has developed what I would call an industry vision for fraud prevention; including a variety of initiatives usch as the collection of data, the dissemination of that data, and the types of information that insurers ought to be able to share. Last year, the IBC board reviewed the issue of sharing data, and there is a consensus that the industry needs to come together. The industry has a responsibility to protect their honest customers from those who are being dishonest, because it’s ultimately [the honest customers] who pay for it.
cu | How would you describe the regulatory landscape today?
Part of advocating successfully for auto reform will mean opening the eyes of elected officials to how far our sector has fallen behind. I was in contact recently with someone who used to be a provincial regulator in one of the larger jurisdictions in the country, and he left the industry for 15 years or so. He came back in on the regulated side and said he was shocked at how little had changed in terms of how regulators approached the task of regulation, and how little had changed in terms of how the industry has been regulated. If anything, there were more rules than ever before. I believe we have lost our way on the regulatory piece. We are regulating by looking in the rearview mirror, as opposed to looking out the windshield. I think regulators need to get on with meeting the needs of consumers. Their first goal, presumably is to protect consumers. That ought to be protecting consumers from risk. But at the moment, they are protecting them from change. We don’t think this is a proper prism to be looking through.