On the brink of retirement after ten years as president of the Insurance Bureau of Canada, George Anderson took the opportunity recently to call on the government to act on insurance issues. At a luncheon hosted by the Insurance Institute of Ontario, Anderson pointed out that in areas such as rising health care costs being carried by insurers and the unfair tax burden placed on the industry, the inaction of governments has contributed to the “sticker shock” being experienced by consumers in the current hard market. He notes that lack of control on health care providers and the continual downloading of health care services to insurers for auto accident victims is a situation long ignored by governments, particularly in Ontario. The result is a bleeding auto insurance industry. As well, the combination of taxes faced by insurers means that the tax burden faced by “the general insurance industry and its customers which annually exceeds its total payroll and net profits”. Anderson was critical of regulators for engaging in what he calls “issue selection”. One example is the push for a national dispute resolution mechanism, now a reality. Although Anderson says the new ombudsman should work, he notes that “equal attention to legislative reforms, especially auto product reforms, might have greatly smoothed and ultimately reduced the rate of the price increase for consumers It also might have reduced the pitch of public discontent and lessened the need for dispute resolution, a service for which insurance regulators never did submit any proof of need when repeatedly requested to do so.” Unfortunately, he says, governments wait until there is sufficient public outcry to react to issues, rather than heeding the repeated warnings of the industry about such issues as health care costs and taxation. “Our political system seems to require higher levels of public discontent before governments will respond to pressures for change.” In looking back on his decade-long tenure, Anderson says that despite changes, many things have remained constant, including the highs and lows of the insurance cycle. “Not too long ago you could find people in the industry willing to proclaim the end of the insurance cycle. We are inclined now to think of these pundits in the same category as BRE-X and Nortel investors.” Three events have contributed to the current hard market, he notes: global pressure on insurance markets over the past several years; correction in stock market valuations hitting insurer investment portfolios hard; and the losses of September 11. Other predicted changes have not taken place, including widespread consolidation in the industry. Despite a certain level of merger and acquisition activity in the Canadian market, “the total market share of the top companies has only grown about 1% a year. By most standards this pace of consolidation is glacial.” And this is a situation he does not predict will alter in the near future. “Judging by the scarcity of capital in international financial markets today and the rumored asking prices for insurance companies that may be for sale, I see nothing which tells me that the pace of consolidation is about to accelerate dramatically.” Predictions of doom and gloom for the broker distribution channel have also been overstated, he adds. “The European experience seems to be that there are limits to direct response market share. About 20 to 25% market share seems to be the current limit of market penetration Brokers are threatened more by a failure to adapt to changing technology and customer demands than by other distribution channels.” And the takeover of the industry by banks has not come to pass, he notes. “For many bankers the returns in the general insurance business do not match other investment opportunities.” Anderson also recalls with pride moments when the world was most challenged and insurers stepped in to deal with losses, including September 11 and the 1998 ice storm. “There are thousands of examples played out in smaller ways everyday across Canada of this fundamental reliability of our industry,” says the outgoing IBC president.