April 1, 2004 by Sean van Zyl, Managing Editor
You have to give the Insurance Bureau of Canada (IBC) one thing – they sure know how to keep things interesting. The latest rumpus ignited by the property and casualty insurance industry’s main lobbying body has been commonly dubbed by brokers and companies alike as “the earnings debacle”. The incident in question concerns the release by the IBC of insurers’ financial returns for 2003 and the wave of negative media attention concerning the extent of the industry’s net profit shown. Actually, more to the point, the ire felt by many in the industry toward the IBC is the manner in which the bureau decided to release this potentially explosive information in light of the political sensitivity surrounding rate hikes of recent years.
Can the IBC really be blamed for the sudden turnaround in the fortunes of insurance companies? After all, is the bureau’s job not to collect industry data and distribute that information without prejudice? Okay, the IBC is a lobby body, serving multiple functions of research and representation, with the prime objective of its creation being the interests of insurers. But, in this latest moment of industry embarrassment, was the IBC supposed to “fudge the numbers” to play down the true profit situation of companies? Clearly such action would be folly and beyond control of the IBC in containing such information.
Then, the issue really appears to be about the IBC’s handling of the earnings results – as the saying goes, “it’s all about the packaging”. In this case, forethought and planning with the understanding that the politicians, consumer groups and general media have been sniffing for insurers’ blood would seem to have been the missing ingredients in the IBC’s media relations policy (or, as some may argue, the lack thereof).
What did definitely not help the IBC’s cause (or insurers) was the seemingly “shoot from the hip” approach taken by the bureau in releasing the 2003 results. “Initial data” in terms of financial ratios, statistics and broad comments, was first made available by the IBC without support of “hard numbers” – this only incensed media frustration and drew attention to there “not quite being something right” from a news hound’s perspective. Then, a week later, the real preliminary numbers were released with the “Wham!” shock of the $2.6 billion from “rags to riches” net profit of insurers dumped on the table like a hooked fish. Not helping the situation was that the prior commentary made by IBC spokespeople at the first release of the “ratio data” in explaining that the profit made is in fact moderate relative to other financial services sectors, and as measured in return on equity (ROE), was long forgotten as the media frenzy ensued. Was there an action response plan in place to immediately and effectively deal with the media? Apparently not. All I can say is Ouch!
However, the IBC’s communication problems seem to go deeper than simply misjudging the mood of the general media. Whatever possessed the incumbents involved to draw out the release of the 2003 results in two stages goes beyond any logic that I can draw on. In fact, the IBC indicated that the data of the 2003 results would be made fully available at the point when the first “teaser information” was presented. The bureau then refused to release any of the charts made in the overhead presentation made before industry members and the media.
This is where I have a personal grievance with the manner in which the IBC dealt with the situation. Under the impression that the results would be made fully available by the specified date, I delayed production of the March issue of CU to include this coverage. And, if not having access to the full financial data (as well as any support graphical material) was not bad enough, it turns out that many of the comments and ratios presented by the IBC in its first release were inaccurate. What did I say earlier about “shoot from the hip”? In this respect, I have to apologize to readers of CU for the inaccurate information reported in my “Editorial” of that issue of the magazine, as well as the “MarketWatch” section. Notably, the IBC managed to initially report the industry’s ROE out by more than a half percentage point – from the initial 10.7% to the current 11.3%.
Winning media support – whether those in the general arena or the business end – should be the IBC’s objective. Alienating the media by being suspicious and shunning in its actions should definitely not be the IBC’s objective, or for that matter the end result. Perhaps a strategic rethink is needed?