Moments in Time (October 01, 2004)

Editorial: The morning after…

October, 1990

The day after the election of Ontario’s first New Democratic Party government, insurers and brokers seemed to agree on one thing – stay calm, make the Ontario Motorist Protection Plan work and don’t over-react.

“Sure the system has had some problems and the industry certainly hasn’t been squeaky clean, but delivery of the OMPP product and service is being done pretty effectively and efficiently,” observed Robert Gunn, president of Royal Insurance Canada.

“For the NDP Government to take it over is a huge decision, the infrastructure alone will carry an unbelievable cost – the new company would be one of the largest insurers in North America.”

If the OMPP has a chance for survival, said Terry Taylor, assistant general manager of the Insurance Brokers Association of Ontario, the ball is clearly in the companies’ court. “The companies have said all along – give us no-fault because it’s the way to reduce claims costs and reduced claims costs lead to lower premiums.”

No sign of hardening in 1990 results

May, 1991

“If you are waiting for a general hardening of the market, don’t hold your breath.” That’s they way Tillinghast consultant Ted Belton summed up the current outlook, in detailing 1990 property-casualty insurance results at the sixth annual Canadian Reinsurance Co. of Toronto breakfast meeting.

The only thing that could precipitate a general hardening would be a “massive reduction of insurers’ capital, in the order of $5-billion.” But “such a withdrawal is not likely to happen voluntarily.”

Mr. Belton calculated surplus capacity at $11.6-billion, for a utilization rate of 53.6 per cent, which was “the driving force behind the soft market.” Since surplus capacity is created by surplus capital, he estimated surplus capital at $4.6-billion, reflecting capital required to support net written premiums (of $13.4-billion) at $5.4-billion, and actual capital invested of $10-billion.

The 1990 underwriting loss was $1.032-billion, or 9.1 per cent of earned premiums, to produce a combined ratio of 109.1 per cent, down from 113.17 per cent in 1989.

Andrew sets record claims

October, 1992

Insurers will pay an estimated $7.3-billion (U.S.) in claims to victims of Hurricane Andrew in Florida, making the storm the costliest disaster in U.S. insurance history, according to Gary Kerney, of the property claims service division of American Insurance Services Group Inc. Louisiana storm losses were estimated at an additional $500-million. State Farm Group said it expects to pay out a record $1.5-billion for claims. Based on the Florida estimate, it means Andrew caused almost 10 times the insured losses of the Los Angeles riots earlier this year, which insurers put at $775-million.

Reinsurance today: A dose of dj vu

November, 1993

Has the reinsurance market changed during the past 10 years or are we going through an historical dj vu ‘all over again’?

The environment in which we try to conduct business in a sane manner has suffered severe change, some of it imposed by us upon ourselves and some of it beyond our influence.

Over 200 reinsurers have left the global market in the past few years, while others come in to join the fray. The people who gave up were not necessarily small, unsophisticated players – certainly not in Canada, e.g. Royal Re, Skandia and NW Re.

What happens in 1996 and beyond will remain to be seen, but I wouldn’t bet on market discipline holding for too long.

Let us finally realize that we cannot change markets, but we can change our own attitudes, behaviour patterns and what we do with the situation as it exists.

Bill 164: Toil and trouble

April, 1994

Lawyers and rehabilitation services aggressively advertise their services in the telephone book’s Yellow Pages and attract new business with radio commercials.

They are encouraging people who have been in an accident within the past two years to contact them since there is potential to ‘squeeze’ additional benefits.

Many claims are being first reported to a lawyer instead of the insurers. Only after physiotherapy and other treatments have been started will the lawyer report the claim to the insurance company. Even in those cases reported directly by a claimant, many have already made an appointment to see a lawyer.

These changes have come about during the past several months in anticipation of the stringent requirements placed on insurers by Bill 164.

Every insurer will experience a severe increase in both claims and escalating investigation costs during 1994, which will prove current rates woefully inadequate. Rate increases of 30 to 50 per cent will be required in the near future unless the Ontario Insurance Commission takes immediate steps to correct an intolerable situation.