Public Meets Private

Insurance Bureau of Canada (IBC) vice president, Ontario Bonnie Lysyk, a woman who grew up in a province next door to Canada’s largest private auto insurance market, has been selected to fill the shoes of Mark Yakabuski, who became president and CEO of IBC last year.

Some may wonder why a woman who forged a career in a public auto sector located at the gateway to Canada’s West would want to leave what’s familiar and represent a completely different type of auto market, one in the midst of negotiating a major regulatory overhaul.

Ask her and she’ll tell you that she loves a good challenge.

PUBLIC VS PRIVATE SECTOR

Lysyk’s career began with Coopers & Lybrand (now PricewaterhouseCoopers) in Winnipeg, Manitoba, where she obtained her chartered accountant designation. She was born, raised and schooled in Winnipeg.

When asked what she misses the most about Manitoba after making the move to Ontario this past January, she chuckles. “Everyone told me that the winters here in Toronto would be so much easier than in Winnipeg, she says. “But I’m still waiting for that.”

Not long after completing her articling at Coopers & Lybrand, she accepted a job at Manitoba Hydro in internal audit. She then moved on to the provincial liquor board as manager, internal audit and security. She subsequently returned to Manitoba Hydro and spent more than a decade there in an array of positions involving finance, audit, process improvement training, special projects, overseas work, business integration, and government relations, and worked as the assistant to the president and CEO on Manitoba Hydro.

Manitoba’s auditor general poached her from her post at Manitoba Hydro to be the deputy auditor general and COO. Six and a half years later, she moved to The Wawanesa Mutual Insurance Company, where she worked as vice president and CFO.

A glance at Lysyk’s curriculum vitae, shows variety has been the spice of her professional career. Even so, one might wonder how Lysyk is adapting to the move from Manitoba, which has a public auto insurance system, to IBC in Ontario, which has Canada’s largest private auto insurance market. At face value, her experience in each of the two auto insurance markets couldn’t appear to be more different. But Lysyk says she likes the challenge inherent in the move to Ontario. Her new role as IBC’s vice president of Ontario appealed to her, she says, because it has variety: it has “financial components, private sector components and public sector components that are interfaced with meeting a lot of stakeholders.”

As for adapting to the differences between the markets, “the work here touches on a lot of things that I have experience with over the years,” she says. “I understand the regulator’s side. I understand where the government’s coming from on their requests. I also understand the industry in terms of what’s important.”

Manitoba’s government sets the tone for its auto insurance using a directive approach, Lysyk observes, when asked to enumerate some similarities and differences in the two distinct types of markets. In contrast, absorbing the 1,200-plus pages of legislation surrounding the Ontario market appeared daunting at first, she says. But with the help of her co-workers at the IBC, and calling on past experience with Wawanesa, which writes auto in Ontario, she has been able to adjust to the complexities of the Ontario market.

“When you’re in a public-sector environment, the government makes all of the choices,” she says. “When you’re here [in Ontario], you have an interplay between a lot of stakeholders and you have a lot of competition so you have a lot of discussion and debate, and that’s good.”

Regardless of whether or not the government is the only player on the field, she says, “you’re dealing with people in both systems, so a big part of your work is making sure that you have good relationships.”

WHAT GOES UP MUST COME DOWN

Lysyk assumes her new role at a time when the Ontario auto insurance industry is discussing reform. The five-year anniversary of Bill 198 and its November 2003 reforms is approaching, and stakeholders are now preparing for the required review of the legislation. Lysyk is charged with the task of representing the province’s insurance industry in proposing any adjustments to the legislation. She’s still relatively new in her role and so she is not in a position to tip the insurers’ hand and reveal specifically what IBC will seek in these negotiations. “The important thing is that there’s stability, availability and affordability of insurance for consumers in Ontario,” she says.

But certainly Ontario’s upcoming discussions about auto reform will represent Lysyk’s first major challenge in her new job. She expects the negotiations will cause her to draw upon her experience in all aspects of the industry’s landscape — including her previous experience working in the government — to help hammer out a workable solution that satisfies all parties in the debate. She stresses the importance of open and frank discussions between the stakeholders so that the provincial government gains a complete perspective on how Bill 198 has affected the Ontario auto insurance market since its adoption in 2003.

“I think people are becoming more aware that, since 2003, there’s been about Cdn$5.3 billion in savings for consumers,” Lysyk says. “After the legislation was changed, there was a period of time when claims costs were reasonable. But now that the system has been in place for awhile, you can see a trend in the rising costs of accident benefits. So part of the discussion will be around the accident benefit costs and why they’re going up. Are they going up for a reason that helps the claimants?”

Lysyk observes Ontario has the highest auto loss ratio in Canada. According to MSA Research Inc.’s preliminary industry results for 2007, Ontario had a loss ratio in auto of 78.5% — a 7% hike over its 2006 results. In comparison, Alberta, the province with the second-highest auto loss ratio, experienced a decline its loss ratio from 64.3% in 2006 to 62.9% in 2007.

Lysyk observes the surge in accident benefit costs could be due to an increase in assessments occurring in the system. “Probably the intent was that more injuries would be handled through the PAF process for WAD I and WAD II, and what they’re finding is that there are treatments happening outside of the PAF,” she says. In addition, increasing costs for attendent care and home care could be adding insult to injury.

Although claims costs have continued to climb, the average auto insurance premium in Ontario has decreased from Cdn$1,499 in November 2003 to Cdn$1,260 in June of 2007. That’s a reduction of nearly 16% for the consumer, representing the largest premium reduction in Canadian history, according to IBC. This translates to aggregate Ontario consumer savings of approximately Cdn$5.3 billion.

But, Lysyk cautions, it may only be a matter of time before the inverse relationship could ultimately spell a disaster for both insurers and consumers. “I think initially there’s going to be discussion to make people aware that the costs are going up,” she says. “And if you have a period when the costs are going up, those higher claims costs do translate into premium increases. So, in order to avoid that situation, I think it’s assumed there would be discussion around how to address the rising costs.”

Lysyk notes the five-year anniversary of the Ontario reforms mandates the opening of the current round of discussions, but the legislation does not speak to outcomes. “While the Insurance Act requires FSCO to analyze the reforms within a five-year time-frame, it doesn’t mean that there has to be changes to legislation or regulations completed by the end of this year,” she says. “It just means that they have to start a process of at least assessing what changes are needed.”

Some might call this first challenge baptism by fire. But Lysyk is confident that with the support of
her colleagues at IBC, as well as fellow industry experts, together a viable solution will be found, satisfying all needs. No doubt, it will be quite the inaugural feather in her cap.