Focus on underwriting results, not investment returns: OSFI to P&C insurers

OSFI’s superintendent of financial institutions, Julie Dickson, wants Canadian property and casualty insurers to focus less on their deteriorating investment income and more on improving their underwriting results.Dickson made the observation in a speech to the 2011 Property and Casualty Insurance Industry Forum in Cambridge, Ontario on June 1.”With investment income driving results, the question is once again asked: Is an insurance company’s core business picking investments, or is it providing insurance? “I would suggest that underwriting insurance should be where your comparative advantage is.”She went on to say insurers should be focusing on improving underwriting results not only because it is their core business, but because “the prognosis for investment returns is not clear.” She noted signs of a slow recovery in underwriting results, but continued vigilance is required. “Indeed, a continued low-interest rate environment would mean that investment income would contribute less to overall net income in future years,” she said. “If companies are facing low investment returns and lackluster underwriting results, then the industry will be confronting two significant negatives.” Dickson said Ontario auto still presents the greatest underwriting challenge. And reforms in Ontario, in and of themselves, won’t be enough to restore the auto insurance product to profitability.”In Ontario, while we are encouraged by larger rate increases taken by individual companies, it is absolutely critical not to let rate adequacy slip away should loss development in the coming months continue the trends of the past,” she said. “Rate increases, together with progress in curtailing fraudulent claims, are required if the industry is to continue to provide the services it offers Ontario drivers.”